Moral Outrage
Whew! God help us!

Chinese ratings agency threatens US with new downgrade

The head of China’s biggest ratings agency, Dagong Global Credit Rating, is warning that it may downgrade the US’s sovereign debt rating again because of Washington’s failure to tackle the federal budget deficit.

Dagong, which has maintained a pessimistic outlook on US fiscal policy, has been leading the charge to downgrade US debt over the last 12 months, lowering the US rating from AA to A+ a year ago. Then in August it downgraded US debt again, to A. (Days later, Standard & Poor’s followed in its wake.)

Intervention by Dagong’s chairman, Guan Jianzhong, comes as another embarrassing political standoff over budget policy looms in Washington. The cross-party “Super Committee” given the job of finding ways to cut the budget deficit is reportedly deadlocked, with Republicans refusing to countenance the tax rises being suggested by Democrats. The committee is due to report by 23 November, but there are fears they could fail to reach agreement, prompting a new crisis.

Any further downgrading of the US credit rating, while making more US borrowing more expensive, would also be a matter of concern to Beijing. China is the largest foreign buyer of US government debt – accounting for around third of all foreign-held US securities – despite the fact it has gradually reduced its holdings since the S&P downgrade and has also lost heavily on its large holdings of US currency.

Since the summer – and the debt-ceiling crisis – China has become ever more vocal about what it describes as the US “addiction” to debt, warning in August that more “devastating credit rating cuts” and global economic turmoil were around the corner unless Washington learned to live within its means.

The Xinhua news agency issued a commentary that cautioned: “The US government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.”

[Read full Guardian article]


No Responses to “Chinese ratings agency threatens US with new downgrade”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: