Chinese rating agency Dagong Global Credit Rating Co. said Wednesday it has cut the credit rating of the United States from A+ to A with a negative outlook after the U.S. federal government announced that the country’s debt limit would be increased.
The decision to lift the debt ceiling will not change the fact that the U.S. national debt growth has outpaced that of its overall economy and fiscal revenue, which will lead to a decline in its debt-paying ability, said Dagong Global in a statement.
As well they might.
The great debt deal raised our debt ceiling immediately by a little over 2 trillion.
In return over a 10 year period the debt is expected to rise approximately 10 trillion, but not to worry, the agreement requires that 2 trillion of the projected 10 be cut. This will result in a projected debt increase of only 8 trillion.
With savings like this we just can lose can we?
The deal didn’t actually cut a damn thing. All it did was make a projected miniscule reduction in the rate of projected enormous debt increase. But it allowed us to incur in excess of 2 trillion in new debt immediately.
I agree with you Br. Michael. But I also think the downgrade was politically motivated. The Chinese have previously stated that they think the dollar should no longer be “the” standard for world currency. Frankly, they could call in all or part of the credit they’ve given our government, cause the dollar’s strength to slip further, and increase the ultimate likelihood that their currency will become the new leader. I think China’s rise and our fall is in the cards. Our empire, like Britain’s after WWII, is on the wane.
China might have another trump card to play against us with all our debt they hold…..one they possibly value above any other. Let’s say they invade Taiwan, to “unite the Chinas”. What will we do about it? Do you think Obama cares one bit about the Taiwanese?
Well, sophy0075, I certainly agree that the Chinese agency is likely to have been influenced by politics, but I certainly CAN’T disagree with their action. I think that the other agencies NOT lowering our rating is equally suspect….
An unbiased analysis of our current and projected debt trajectory would have to show how rapidly we are approaching the Greek situation…. And the increasing burden of our government on our economy must be crippling our ability to grow out of the situation.
3. No, Capt. Deacon Warren, I don’t think he does! As for the credit problem, I think we need to be a whole lot more concerned about China’s military ambitions in WestPac, but that’s a subject for another thread.
As noted by No. 1, they might be right. I have the impression that the rating agencies in the West have been extraordinarily patient with the monkeyshines of the last few weeks in the US. But, as others have suggested, there could be no better outcome for the Chinese (both in the sense of their being major bondholders and in the sense of their being geopolitical rivals) than to see a slight decrease in rating of US debt instruments without their being a decided increase in risk. That would improve yields while weakening the US economy.
As for Taiwan, why invade militarily, incur tremendous wasted and destruction, when economic logic dictates that Taiwan will simply be drawn in by the tractor beam of China’s immense economic power? There is an extraordinarily high and steadily increasing level of economic integration and activity between Taiwan and the PRC.