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

Posted on August 2, 2011


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 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.

1 Background information and foreign reporting for this blog was provided by Deepanshu Bagcheeof CNBC Asia.