China's rating agency, Dagong, 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"Zero Hedge
 |
| Dagong chairman Guan Jianzhong, a paid adviser to China’s government, at his office in Beijing |
Added: "To eat May's grain in April" Criticism from Xinhua Agency.
This may be an accurate assessment but it carries no weight in markets. S&P and Moody's carry the weight but are probably conservatively biased. They certainly misread the risk associated with the structured instruments based on sub-prime mortgages. They may in fact be incapable of accurate risk estimation of US financial products.
ReplyDeleteThe value of the Chinese assessment is if it is more accurate and aligns with one's own assessment than it should strengthen one's confidence.
Oh, how o tell?
Earlier post ( http://metanoodle.blogspot.com/2011/07/institutions-forced-to-sell-if-2-out-of.html ) suggests the Big Three's power is constrained by fear they will force institutional selling if any two of the rating agencies drop the US a notch. Their weight looks a little less impressive from that viewpoint.
ReplyDelete