Founded in 1994, Beijing-based Dagong Global Credit Rating Co. is making headlines once again… this time for downgrading US debt from its already world’s lowest, if not most credible, assessment of double-A, to a lower by one level A+ with negative outlook.
The lowered rating is mainly due to round two of Fed quantitative easing. Among other problems, Dagong highlights “serious defects in the US economy,” including lowered “national solvency,” and “long-term recession.” In this process, the China-based credit rating agency is of course also describing, in a backhanded way, how its own home nation’s biggest foreign reserve holding, US bonds, is deeply flawed.
From The Telegraph:
“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.’
“The analysis concludes: ‘The potential overall crisis in the world resulting from the US dollar depreciation will increase the uncertainty of the U.S. economic recovery. Under the circumstances that none of the economic factors influencing the U.S. economy has turned better explicitly it is possible that the US will continue to expand the use of its loose monetary policy, damaging the interests the creditors. Therefore, given the current situation, the United States may face much unpredictable risks in solvency in the coming one to two years. Accordingly, Dagong assigns negative outlook on both local and foreign currency sovereign credit ratings of the United States.’”
Dagong’s first report was already insulting for being pretty much true… but, what is this? It was one thing to make the point and bring international attention to the US’ papered over debt debacle However, it’s quite another to bring up a different, lowered version of the US credit rating every single time the feds make a catastrophic and world financial system-jeopardizing blunder (thank you, QE2). Continually downgrading US debt doesn’t seem fair at all, something like punching below the belt. This new strategy is almost certain to get embarrassing quickly.
To drive home this point, just take a look at what is perhaps the report’s most biting quote — which came to our attention by way of The Reformed Broker:
“Though it is likely for the current loose monetary policy to postpone the occurrence of difficulties, yet in the long run, it will be proven to be a practice resembling drinking poison to quench thirst.”
Again, thank you Fed. Thank you for your QE2 poison. And, thank you Dagong, for pointing it out. Way to pick on the fat kid. You can read Dagong’s full report in all its colorful detail in a PDF here entitled, “Surveillance Report for Sovereign Credit Rating: The United States of America.”
Rocky Vega,The Daily Reckoning
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
In India, rupee officially loses about 50% value every 10 years ( unofficially inflation is probably twice that), and things have been mostly fine for several decades. US can manage higher inflation the same way, for a long, long time. Obviously it pays to hold real physical assets and gold in an inflationary environment.
Pingback: Joshua A. Jacobi
Pingback: plantacja lawendy
Pingback: walking dead cast
Pingback: read the full writeup
Pingback: come fare soldi da casa
Pingback: make money from home
Pingback: shoulder surgery recovery
Pingback: Zalando Gutschein
Pingback: Facebook Like Button
Pingback: ageless male scam
Pingback: priscilla presley cirugia
Pingback: get ageless male
Pingback: buy ageless male
Pingback: casino' online bonus senza deposito immediato
Pingback: visit this website
The dollar in your pocket is worth a whole lot less today than 100 years ago. And you have the Federal Reserve to thank for you. So, as the Fed approaches its 100th birthday, Gregory Bresiger reflects on the controversial institution, relaying the criticisms of several of the Fed's most vocal opponents. Read on...
There's been a lot of press lately about the 3-D printing revolution - much of it right here on The Daily Reckoning. But there is one technology that's already threatening to make 3-D printing yesterday's news. Josh Grasmick examines a new kind of printing... that takes place in the 4th dimension. Read on...
Rejoice! What was perhaps the freest market in the entire world is now ended. Crushed. Wiped out by the swift hand of the state. Wait... That's NOT a good thing? (Sigh)... Oh well. It was fun while it lasted. Dominic Frisby explains why the shutdown of the Silk Road is such a travesty. Read on...
There is one chart, just one chart, that market analysts and gold bugs alike could learn a lot from. It displays clearly the ebb and flow of one critically important trend, where it's headed through the end of the year, and how you can use it to your advantage. Greg Guenthner explains...
China's push towards a more market-based economy could kick into high-gear, as recently proposed economic reforms are some of the country's most radical policy changes in over three decades. But what will that mean for foreign investors and how could it shape the global economy? Frank Holmes takes a closer look...
John Mauldin spoke with Steve Forbes on the future of gold and the Federal Reserve in an interview released yesterday. What he said may surprise you.