China Downgrades United States Credit

[dixiegrrrrl]

The United States has lost its double-A credit rating with Dagong Global Credit Rating Co., Ltd., the first domestic rating agency in China, due to its new round of quantitative easing policy.

Dagong Global on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the U.S. by one level to A+ from previous AA with “negative” outlook.

The Chinese rating agency said the downgrade reflected the U.S.’s deteriorating debt repayment capability and drastic decline of the U.S. government’s intention of debt repayment.

“The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency,” Dagong said in a report.

http://blogs.wsj.com/marketbeat/2010/11/09/chinese-credit-rater-downgrades-us/

[ixion]

1. The other shoe will drop when Asia turns off the money spigot

When we can no longer borrow 2+ billion a day just to cover the debt service, it's going to get interesting.

[notesdev]

2. We're borrowing a good deal more than that

It's roughly $5B/day of debt that the federal government alone is borrowing. Without the ability to borrow we would have to instantly cut the federal budget by 42%. Entitlements alone consume more money than we would have at that point, so it would be real crunch time on a very immediate basis.

People round here don't take me seriously when I say they need to educate themselves on economic issues and make it our top party policy priority.

[ixion]

5. Yeah, I was using an old figure (hence the '+')... appreciate the update

despite the fact that it's horrific.

[jtuck004]

9. Perhaps you are saying that for the benefit of people who were trained

in pre-70's economics, but I am sure you know that since we are no longer on a gold standard, we don't technically "borrow". Look up Bernanke's and others work on this - they simply add zeroes to the accounts of the reserve banks.And they make public statements to that effect.

We cannot run out of money - we manufacture it, and the zeroes.

That does not mean it can't decrease in purchasing power, because it is still dependent on what people "think" about the currency, which causes the day-to-day fluctuations.

It's all a big computer game now.

[dixiegrrrrl]

15. "they need to educate themselves on economic issues "

I have no idea why some of the smartest people I know are reduced to glazed eyes about economic issues.
there are so many good resources on the web, like Zero Hedge, Max Keiser, the Market ticker,
even Bill Gross, and Bill Black's stuff is easily accessible.
Yet, people remain unaware, then wonder what the hell happened when the economy bites them in the ass.
Our jobs, our money, and our homes are being stolen in broad daylight, yet few seem to see it happening.

[dmallind]

3. outof interest what % of US debt do you think "Asia" has

why somehow a continrnt should or could act in a monolithic fashion is another issue of course....

[ixion]

6. they will not generally act en masse

However, China acting alone will have a detrimental effect.

When I say 'Asia' I'm speaking about 3 the countries that hold a large chunk of our debt, namely: China, Japan and Saudi Arabia.

http://en.wikipedia.org/wiki/United_States_public_debt

[dmallind]

10. you know the percentages on that table are only of foreign owned debt, correct?

China for example owns under 6% of total debt. Foreign owned debt in toto is less than 30% of US debt, which is dominated by US government holdings. If China tomorrow refused to buy any more US debt (which would essentially cut off the biggest market in the world from their exporters - completely unrealistic with the current power balance) the panic would be short lived and not a significant impact on our ability to borrow per se.

[ixion]

11. Yes, I'm aware. We're talking about macroeconomics...

when you pay a credit card with a credit card, eventually you're screwed. That is what we've been doing, and eventually, we'll be cut off.

[dmallind]

13. but agin you seem convinced china and "asia" can determine us debt. how?

they are a tiny part of it - why scared of their actions? if you were in debt would someone who you owed 6% of it be your biggest fear?

[ixion]

14. If I needed to borrow from them on a daily basis just to cover debt service on previous loans

I would say that I would be concerned, at least. Wouldn't you? :shrug:

[Yavin4]

19. If They Cut Us Off

Who would buy their crap?

[RKP5637]

4. Only a matter of time 'till we are fully a bankrupt nation in many ways. The US

climbing out of this will be very difficult, this ain't post WWII now and all of the prosperity with no competition.

[ixion]

7. Indeed. Difficult and painful, and a whole heapa hard work...

People think they know what hard work is. My bet is that they don't know diddly.

[RKP5637]

8. Yep, it will be much hard work combined with sickness, poverty and a failed

infrastructure. I still think many think well, it just can't happen here. And those thinking that need to go read a bit of history. There is nothing special about the US that says it can go on and on forever while being torn apart in endless ways.

I guess the US can use its military might to force the earth into compliance, but that's not an effective solution. I listen to some politicians and they are woefully unqualified for the office they hold. I think if the R's are fully in the nation will be financially decimated in short order. The R's have a history of that...

[Name removed]

12. Deleted message

Message removed by moderator. Click here to review the message board rules.

[AnArmyVeteran]

16. Great post. And Happy Birthday again! I hope it was a great one!

[dixiegrrrrl]

17. You are too kind.

Maybe next year I can haz a COLA?????

[AnArmyVeteran]

18. You bet!!!!!

[upi402]

20. the parasite becomes the host? n/t