An Economic Warning Sign for America, Elections in Europe, Trying to Reverse Brexit

Another warning sign before America’s trip off an economic cliff: Moody’s Ratings stripped the United States government of its aaa credit rating on Friday. It cited the government’s failure to slow the ballooning of the national debt. Elon Musk was right: America must reduce its spending, or this ride will come to an abrupt end.

[BRIEF]

This morning’s stock market is processing the downgrade. The 30-year bond yield jumped above 5 percent. America’s creditors are waking up to the fact that bonds are a risky investment. The dollar weakened against other G-10 currencies.

Moody’s is the last of the three major rating agencies to lower the U.S. government’s rating.

• Standard & Poor’s downgraded the government’s creditworthiness in 2011.
• Fitch Ratings followed suit in 2023.

White House communications director Steven Cheung basically dismissed the downgrade as a political attack from Moody’s economist Mark Zandi against President Trump. Regardless of Zandi’s feelings about Trump, it is undeniable that U.S. debt has been growing faster than the gdp for 17 years.

• Before the 2008 financial crisis, the debt-to-gdp ratio was 64 percent.
• It is nearly double that today, at 124 percent.
• And it keeps getting worse. Moody’s explains, “We expect federal deficits to widen, reaching nearly 9 percent of (the U.S. economy) by 2035, up from 6.4 percent in 2024, driven mainly by increased interest payments on debt, rising entitlement spending, and relatively low revenue generation.'’

Congressional budget projections estimate that by 2044 the government will be spending more on interest than on everything else except mandatory entitlements (i.e. Social Security, Medicare, Medicaid, etc). Yet these projections assume the average yield of a 10-year treasury bond will remain below 4.6 percent. Today it’s up to 4.495 percent, indicating that higher interest rates are coming soon, which will be catastrophic for servicing the debt.

You don’t need to know Bible prophecy to know that America’s fiscal trajectory is leading to ruin. It is simple math. But prophecy puts a few exclamation points at the end of that warning.

In our feature story this morning, by Josué Michels, we look at how Europeans are looking to take advantage of investors’ skittishness and the dollar’s shakiness.

Portugal, Romania elections show major change sweeping Europe: Politics as usual is stuck. Disgruntled voters are weary, sick of standard parties, souring even on democracy itself. They are experimenting with new solutions.

Portugal is in a terrible political muddle. Yesterday it held its third election in three years and got another inconclusive result. The center-right Democratic Alliance won, led by Prime Minister Luis Montenegro—but once again he has no clear path to a majority.

The real surprise was the success of the fringe-right Chega party, founded just six years ago. Chega won 58 seats—the same number as the mainstream Socialist party. And since four seats have yet to be declared, Chega could rocket to second place.

The system of two-party rule in Portugal is over.
—Andre Ventura, Chega leader

He is right, but the same problem remains. To get a majority, the Democratic Alliance has to join forces either with Chega—which they promised not to—or with the Socialists, who helped bring down the prime minister’s last government two months ago.

Romania avoided a similar paralysis only because it has a different election system. Yesterday it held round two of its elections with only the top two candidates running. It happens that neither candidate is from a mainstream political party.

Back in November, a far-right candidate won, but Romania’s court system annulled the election and stopped the victor from running again. This time, another far-right leader, George Simion, made it to the final vote, but he was beaten by Nicosur Dan, a centrist, independent of any party affiliations.

Clearly, Romanians are fed up with their usual political parties. Most of Europe is struggling with this same trend.

The Bible prophesies that soon we will see a Europe governed by kings—not presidents—led by one overall strongman. That is the ultimate destination of this political shift.

Keir Starmer is trying to reverse Brexit: In a deal with the European Union finalized today, Britain’s prime minister is undermining the UK’s independence. The deal extends EU fishing boats’ access to British waters for 12 years in exchange for trade benefits like reduced checks on food and agricultural exports. Critics argue this undermines Brexit’s promise of “taking back control” of UK waters. They are also concerned about Britain accepting the EU’s “common standards” on food and subjecting themselves to the authority of the European Court of Justice.

“It is hard to exaggerate the significance of this concession,” the Telegraph says. “At a stroke, Labour will have sacrificed one of the biggest benefits of Brexit: taking back control of our own rules. Once national sovereignty is given away on food standards, we will find ourselves on a slippery slope. Over time, other areas of the economy will inexorably be drawn back into the EU’s orbit.”

IN OTHER NEWS

Joe Biden has stage 4 cancer: On Friday, it was revealed that the 82-year-old former U.S. president has an aggressive form of prostate cancer, characterized by a Gleason score of 9 and metastasis to the bone. Some doctors assert such cancer takes years to develop, and it’s impossible this wasn’t detected long ago. It appears consistent with the now-exposed cover-up of Biden’s mental decline—“breaking news” in a new book by cnn’s Jake Tapper out tomorrow.

Why Vance didn’t visit Israel: According to Axios, the U.S. vice president canceled a planned visit to Israel to show his disapproval of Israel’s expanded military offensive in Gaza, dubbed “Gideon’s Chariots.” While the official reason cited was “logistical constraints,” a senior U.S. official revealed that Vance’s decision was driven by the Trump administration’s push for a ceasefire and hostage deal, which conflicted with Israel’s escalation. This move highlights the pressure Israel is facing from the U.S. to stop its effort to destroy Hamas to get another hostage deal, and the Trump administration’s fraying relationship with Benjamin Netanyahu.

Russia tests NATO resolve: Russia violated Estonian airspace last week to protect a ship in Russia’s shadow fleet illegally transporting Russian oil, our In Brief reports.

Golden anniversary: China and Europe commemorated 50 years of diplomatic relations last week as they worked to expand trade, Cliff Lilangan reports.