Wednesday, November 10, 2010

China's lead credit rating agency downgrades US Treasury Bonds

One of China’s leading credit rating agencies has downgraded United States of America government debt in response to what it sees as deliberate devaluation of the dollar by quantitative easing and other means.

If China, now the second biggest economy in the world, stops buying US government bonds this could have a very negative effect on the global recovery. The Dagong Global Credit Rating Company analysis is highly critical of American attempts to borrow their way out of debt. It criticises competitive currency devaluation and predicts a “long-term recession”.

Dagong Global Credit says: “In order to rescue the national crisis, the US government resorted to the extreme economic policy of depreciating the U.S. dollar at all costs and this fully exposes the deep-rooted problem in the development and the management model of national economy.

“It would be difficult for the U.S. to find the correct path to revive the US economy should the US government fail to understand the source of the credit crunch and the development law of a modern credit economy, and stick to the mindset of traditional economic management model, which indicates that the US economic and social development will enter a long-term recession phase.”
Read the rest here.

I would note that nothing as politically sensitive as this would be allowed to occur in China without the approval of the Chinese government. This likely is a message to Washington from its chief creditor that they don't like being stiffed.

1 comment:

Visibilium said...

You're right about being stiffed. It's no way to treat good customers.