Chinese Credit Agency Downgrades U.S. Debt (Again)

by Jason Farrell.

China’s Dagong Global Credit Rating just downgraded the U.S.’s credit rating from A to A-minus, according to Zero Hedge.
Dagong pulled no punches in its announcement this morning. “Since the outbreak of the U.S. debt crisis in 2008, the deviation between the federal government’s sources of debt repayments and the country’s real wealth creation capacity has been constantly broadened,” they grumbled. “The huge amount of government debts that lack the basis of repayment always stands on the brink of default, and this situation is difficult to change in the long term.”


American-based Fitch still rates U.S. sovereign debt at AAA… they did, however, downgrade the outlook to negative, following the horn-locking in Congress. Fitch’s explanation explicitly blamed political problems and the recent risk of default.
Perhaps the most interesting element is that Dagong doesn’t lay the same blame at the feet of the recent debt ceiling debacle and government shutdown. Instead, it indicated that the recent congressional pandemonium “highlights the deterioration of the government’s solvency, pushing the sovereign debts into a crisis status.”
China holds a boatload of U.S. Treasury securities: about $1.3 trillion, at last check. It is certainly getting squeamish about the money it holds. Dagong now estimates that the “depreciation of the U.S. dollar caused a loss of $628.5 billion on foreign creditors over the years of 2008-2012.”