海角大神

Founded in 1994, Beijing-based Dagong Global Credit Rating Co. is making headlines 鈥� this time for downgrading US debt from its already world鈥檚 lowest, if not most credible, assessment of double-A, to a lower by one level A+ with negative outlook.

The lowered rating is mainly due to round two of Fed quantitative easing. Among other problems, Dagong highlights 鈥渟erious defects in the US economy,鈥� including lowered 鈥渘ational solvency,鈥� and 鈥渓ong-term recession.鈥� In this process, the China-based credit rating agency is of course also describing, in a backhanded way, how its own home nation鈥檚 biggest foreign reserve holding, US bonds, is deeply flawed.

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鈥淭he Dagong Global Credit Rating Company analysis is highly critical of American attempts to borrow their way out of debt. It criticises competitive currency devaluation and predicts a 鈥渓ong-term recession鈥�. Dagong Global Credit says: 鈥業n order to rescue the national crisis, the US government resorted to the extreme economic policy of depreciating the U.S. dollar at all costs and this fully exposes the deep-rooted problem in the development and the management model of national economy.

鈥溾�橧t would be difficult for the U.S. to find the correct path to revive the US economy should the US government fail to understand the source of the credit crunch and the development law of a modern credit economy, and stick to the mindset of traditional economic management model, which indicates that the US economic and social development will enter a long-term recession phase.鈥�

鈥淭he analysis concludes: 鈥楾he potential overall crisis in the world resulting from the US dollar depreciation will increase the uncertainty of the U.S. economic recovery. Under the circumstances that none of the economic factors influencing the U.S. economy has turned better explicitly it is possible that the US will continue to expand the use of its loose monetary policy, damaging the interests the creditors. Therefore, given the current situation, the United States may face much unpredictable risks in solvency in the coming one to two years. Accordingly, Dagong assigns negative outlook on both local and foreign currency sovereign credit ratings of the United States.鈥欌��

Dagong鈥檚 first report was already insulting for being pretty much true鈥� but, what is this? It was one thing to make the point and bring international attention to the US鈥� papered over debt debacle However, it鈥檚 quite another to bring up a different, lowered version of the US credit rating every single time the feds make a catastrophic and world financial system-jeopardizing blunder (thank you, QE2). Continually downgrading US debt doesn鈥檛 seem fair at all, something like punching below the belt. This new strategy is almost certain to get embarrassing quickly.

To drive home this point, just take a look at what is perhaps the report鈥檚 鈥� which came to our attention by way of The Reformed Broker:

鈥淭hough it is likely for the current loose monetary policy to postpone the occurrence of difficulties, yet in the long run, it will be proven to be a practice resembling drinking poison to quench thirst.鈥�

Again, thank you Fed. Thank you for your QE2 poison. And, thank you Dagong, for pointing it out. Way to pick on the fat kid. You can read Dagong鈥檚 full report in all its colorful detail in a PDF here entitled, 鈥�.鈥�

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