Third Party & Independents Archives

China Global cuts America’s credit rating, regardless of “the deal”

Hey, guess what, America!

After all the gnashing of teeth, the faux-righteous faux-indignation and cartoonish political posturing to prevent a credit default and risk the global credit rating agencies downgrading America’s triple-A rating, China’s Dagong Global Credit Rating has cut its rating on U.S. sovereign debt to A from A+ and has also put the U.S. on negative outlook, according to China’s main news agency Xinhua (the news will break stateside tomorrow morning).

The decision came despite the U.S. raising the debt ceiling and averting a default, and even as both Fitch and Moody’s re-affirmed the U.S.’s Triple-A rating.

According to Xinhua, Dagong’s decision was based on “the fact that the U.S. national debt growth had outpaced economic growth and fiscal revenue, hurting the country’s debt-paying ability.”

So what’s this mean to you and me? Well, the largest credit rating agency for the country that we owe $3.2 Trillion of our total debt has just decided that we, as a nation, are a higher risk and threat against repayment. In other words, our largest banker thinks we’re one step closer to being a deadbeat.

You do the math.

But while most investors rely on ratings from the big three firms – Moody’s, Standard & Poor’s and Fitch, you can bet the farm (assuming it hasn’t been foreclosed) that the Dow Jones is going to go into a free fall tomorrow that will make Keanu Reeves and Patrick Swayze’s drop in “Point Break” look like a hop off a see-saw. Why? Because it’s a reason to SPECULATE. It doesn’t matter what relevance the speculation has to actual facts. It’s investment speculation. The sheep will follow the shepherd.

Whether or not the “industry experts” give any credulity to Dagong’s rating cut, it is a clear and absolute demonstration that the rest of the world now sees – without any shadow of doubt – that America has rendered itself unable to deal decisively with the debt issue, or any issue for that matter, because partisan politics is now, more than ever, more important than policy. And it also shows the world that we, as a nation, are willing to sit back and watch the political puppet theatre and do nothing except scream about abortions and gay rights while the platform we’re screaming from is being lit on fire.

With George W. Bush in the White House, America was a laughingstock in global circles because we had a clown at the helm. Now, with Barack Obama in the White House, America is a laughingstock in global circles because we have a mollusk at the helm.

And you and I – not the millionaires and billionaires – *WE* are going to pay, and pay HARD, for his spinelessness.

And if you think that the global circles didn’t notice how fast and furiously our “esteemed elected leaders” beat feet out of Washington today to go on yet another “recess,” or that they don’t expect the members of Congress to “chillax” now that the “hard decision” has been made so they can go back to doing even more nothing than usual, then I’ve got a magic green superhero ring to sell you.

“Big fluctuations and uncertainty in the U.S. Treasury market will influence the stability of international monetary and financial systems, thus hurting the global economic recovery,” said Zhou Xiaochuan, head of the People’s Bank of China. “We hope that the U.S. government and the Congress will take concrete and responsible policy measures … to properly deal with its debt issues, so as to ensure smooth operation of the Treasury market and investor safety.”

For China, which has repeatedly urged the White House to protect its dollar investment holdings, Zhou said a jump in Treasury yields would be financially painful as it is the biggest creditor to the United States.

Read between the lines there. America’s BANKER is flat-out telling Congress to not dicker around and do the usual two-step and to be RESPONSIBLE … or else.

All those who think the pompous, ignorant, party-before-country, votes-for-sale bureaucrats in Washington will actually HEED China’s warning, say “Aye.”

That sound you’re hearing is crickets, and politicians giggling.

Posted by Gary St. Lawrence at August 3, 2011 1:09 AM
Comments
Comment #326933

I wouldn’t be too certain about there being a huge selloff. One thing for sure, though, making the debt ceiling a political plaything is an innovative thought that ranks right up there with the square wheel.

Posted by: Stephen Daugherty at August 3, 2011 8:42 AM
Comment #326935

GSL, I believe you are saying the economy will tank. You seem to blame both bush and obama, but I am having a hard time understanding your comments. If our economy is failing; why is it failing, and what must be done to correct the problem? It was Obama and the left who were predicting a default and financial collaps, which was political posturing; so why are we still falling?

Posted by: Frank at August 3, 2011 9:29 AM
Comment #326941

We are so screwed.

Yet, looking on the brighter side, this may end up ushering in a brand new era of progressive political engagement.
Economic downturns certainly have done so in the past…

Posted by: Adrienne at August 3, 2011 2:31 PM
Comment #326950

3:30 PM, 8/3/2011

Dow up 29.82
S&P 500 up 6.29
Nasdaq up 23.83

Numerous websites show our debt to China as being $1.16 trillion or about 8% of our total debt. The combined debt we owe to other countries is $4.6 trillon out of a total debt of $14.3 trillion.

Posted by: Royal Flush at August 3, 2011 4:39 PM
Comment #326957

United States’ AAA Credit Rating Still Under Threat

Posted by: Adrienne at August 3, 2011 5:34 PM
Comment #326961

Thanks for the link Adrienne. I will side with those who believe a downgrade by the rating agencies in the US won’t mean much in terms of interest rate increases.

I have argued before, and will again here, that nations, and most individuals purchasing US bonds don’t bother to check our rating. They know the US. The tiny, tiny Isle of Mann has a AAA rating and I don’t expect the world to run for their bonds. Canada and Australia have AAA ratings but I don’t expect them to need massive amounts of borrowed dollars to keep their economies running.

Some fear China may stop purchasing our debt. I hope they are correct, but seriously doubt it. If we can’t sell the debt at interest rates we can hardly afford now, perhaps one can make a case to stop borrowing and live within our means.

Borrowing is tempting when money is cheap and not so tempting when money is expensive.

Posted by: Royal Flush at August 3, 2011 6:32 PM
Comment #326965

With all this talk about the federal deficit, you would think that it is was the public sector that collapsed from excessive debt in 2008. It did not. Public sector debt to GDP was not excessive prior to the collapse despite two unfunded wars. It was the private sector debt that was the problem. It exceeded 350% of GDP in 2007! When it collapsed, federal revenues collapsed and the deficit soared.

Its about time that we concentrated on the real problem: a sustainable private sector economy. Over the past few recessionary cycles, it is increasingly clear that growth in the economy and the money supply has become dependent upon inflationary bubbles fueled by excessive private sector debt. Think about it. How would the economy done in the 90s without the dot.com bubble? How about the 2000s without the housing bubble? The Bush tax cuts of 2001-2003 were essentially ineffective in creating job growth until the housing bubble took off in 2005-2007.

Both sides, in my opinion, are avoiding the real issue: its the economy, stupid!

Posted by: Rich at August 3, 2011 7:29 PM
Comment #326976

Roy,
Check into what is going on in Iceland. When the international banking organizations demanded the Icelandic public pay back the debt incurred by the private banks, the Icelanders said ‘no.’ When told they would be reduced to the status of Cuba in the international community, the Icelanders said ‘we would rather be like Cuba than Haiti.’

Posted by: phx8 at August 3, 2011 10:53 PM
Comment #326996

When there are enough Americans willing to sit down in the streets of every major city and bring business to a halt, they will get results, one way or the other.

Posted by: jlw at August 4, 2011 02:38 PM

What results would you expect jlw?

Posted by: Royal Flush at August 4, 2011 3:02 PM
Comment #327005

Foreign markets tanking. Our geniuses in the GOP sure chose a great time to threaten default UNLESS we pursued a contractionary economic policy with spending cuts. Nice going, guys. Oh, and way to cave, Obama. Just about every economist in the world knew those guys were wrong, but you were afraid of a crisis, Obama, even one forced on you, that you caved. Just brilliant.

Posted by: phx8 at August 4, 2011 5:04 PM
Comment #327008

phx8, yeah — ours is too.
US stocks plunge, Dow falls more than 500 points

Posted by: Adrienne at August 4, 2011 5:21 PM
Comment #327010

“Foreign markets tanking. Our geniuses in the GOP sure chose a great time to threaten default UNLESS we pursued a contractionary economic policy with spending cuts. Nice going, guys.”

phx8,

To say nothing about the US market today. The “geniuses” used their favorite tactics of fear and intransigence to panic the US into an austerity program while the economy is on life support. No ideas for economic stimulus. Nothing at all from these “geniuses.”

I also agree with your comment about Obama. He should have drawn a line in the sand and dared them to tank the US economy on their ideological obsessions. Instead, he chose the “go along to get along” routine. Truly sad.

Posted by: Rich at August 4, 2011 5:27 PM
Comment #327060

Dow: -512.76
S&P 500 - 60.16
NASDAQ -136.68
S&P 100 - 25.06
30-yr T-Note - 0.13

Where’s all the self-righteous indignation, dismissal and party posturing now?

Posted by: Gary St. Lawrence at August 5, 2011 2:33 AM
Comment #327063

Krugman: Rates of Wrath

Not good news in stock markets — but you really have to look at the bond markets to get the full awfulness of the situation.

The US 10-year bond rate is now down to 2.5%. So much for those bond vigilantes. What this rate is saying is that markets are pricing in terrible economic performance, quite possibly a double dip. And it also says that Washington’s deficit obsession has been utterly, totally wrong-headed.

Posted by: Adrienne at August 5, 2011 3:13 AM
Comment #327085

Since nobody in this thread seems to want to actually discuss THE SUBJECT OF MY POST but instead just wants to spew their own regurgitated partisan bullsh*t talking points, I’m deleting all non-relevant comments.

Don’t like it? Go spew your crap someplace where it’s applicable to the topic.

Posted by: Gary St. Lawrence at August 5, 2011 12:23 PM
Comment #327090

Since you want to regulate what is being said on your posts like your mentor SD. Then I and hopefully many others will just ignore your posts.

Posted by: TomT at August 5, 2011 4:21 PM
Comment #327204

TomT: “Since you want to regulate what is being said on your posts like your mentor SD. Then I and hopefully many others will just ignore your posts.”

Well, since I *dare* to insist that the discussions following my posts should be ABOUT the subject of my post, yeah, I guess you should ignore them. There’s no room here for the standard-issue hate-spew, buzz words, lies and partisan garbage.

You’re leaving? Good riddance, lemming.

Posted by: Gary St. Lawrence at August 7, 2011 3:51 AM
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