"Of the big-3 credit rating agencies, only the S&P rating agency had the courage and fortitude to speak the truth, about the severe deterioration of America’s financial status. S&P shocked the political establishment in Washington, by following through with its threat to downgrade US Treasury debt to AA+ on the evening of August 5th. S&P added that the US Treasury debt could be downgraded further, if the crooked and inept politicians in Washington haven’t taken any meaningful moves to cut the size of its mounting debt.
For most of the past decade, Beijing has been a loyal creditor of the US Treasury, recycling more than $2-trillion of its foreign currency holding into US-dollar denominated bonds, thus helping to keep US-interest rates artificially low. For the most part, US Treasuries represent the only destination large enough to accommodate China’s vast holdings, and that can absorb a trade in the tens of billions of dollars of T-notes, without moving prices too far. However, in a shocking development, Beijing has suddenly decided to take a very hard-line with the US Treasury, and is openly calling upon Washington to “cure its addiction to debts and learn to live within its means,” before it resumes lending to the US-Treasury..."
Yet the most important voice in the debate about the credit worthiness of America’s debt, is not the twisted opinions of the US-credit rating agencies, but rather, that of China’s credit rating agency - Dagong Global Credit Rating, which downgraded US-Treasury’s debt from A+ to single-A last week. “The US decision to raise the borrowing ceiling will not change the fact that the growth of its debt has outpaced its overall economic growth and fiscal revenue. “It may further erode the country’s debt paying ability in the coming years,” Dagong Global said. It also issued a negative outlook. “The rise of the US-debt ceiling helped temporarily avoid a debt default but has not improved its solvency and the increasing government debt burden will deteriorate the US sovereign debt crisis.”
Beijing has earned the right to criticize the US-government’s addiction to debt, since it’s the biggest foreign holder of US Treasury notes, and it’s much better at managing state finances. China posted a fiscal surplus of 1.25-trillion yuan ($193-billion) in the first half of the year as steady economic growth lifted government revenues, the Ministry of Finance said on July 14th. The budget surplus, equal to about 6.1% of China’s gross domestic product from January to June, is well above Beijing’s target for a full-year fiscal deficit of 2% of GDP.
For most of the past decade, Beijing has been a loyal creditor of the US Treasury, recycling more than $2-trillion of its foreign currency holding into US-dollar denominated bonds, thus helping to keep US-interest rates artificially low. For the most part, US Treasuries represent the only destination large enough to accommodate China’s vast holdings, and that can absorb a trade in the tens of billions of dollars of T-notes, without moving prices too far. However, in a shocking development, Beijing has suddenly decided to take a very hard-line with the US Treasury, and is openly calling upon Washington to “cure its addiction to debts and learn to live within its means,” before it resumes lending to the US-Treasury..."
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