Big Money Beginning To Flee USA?
Posted in the Brattleboro Forum
#1 Oct 17, 2013
Is this the begining of the great economic cascade or stampede
Chinese agency downgrades US credit rating
A teller counts US dollars and Chinese 100-yuan notes at a bank in Hefei, east China's Anhui province on January 16, 2011
AFP - A Chinese ratings agency downgraded its US sovereign credit rating Thursday despite Washington's resolution of the debt ceiling deadlock, warning that fundamentals for a potential default remained "unchanged".
Dagong lowered its ratings for US local and foreign currency credit from A to A-, maintaining a negative outlook, the agency said in a statement.
The announcement came after the US Congress passed and President Barack Obama signed a bill that extends the nation's borrowing authority and ends a two-week government shutdown.
Read more on FRANCE 24: Republicans "biggest losers" in shutdown aftermath
"The fundamental situation that the debt growth rate significantly outpaces that of fiscal income and gross domestic product remains unchanged," Dagong said in the statement, adding Washington's solvency was vulnerable as old debts were still repaid through raising new debts.
"Hence the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future," it said.
Dagong made headlines in August 2011 when it lowered its main rating for US sovereign debt after Congress passed an earlier bill to raise Washington's debt ceiling.
The agency, which is far less prominent than long-established Western competitors including Moody's, Fitch and Standard and Poor's, has been working to further raise its profile.
China's official news agency Xinhua said Thursday in a bylined commentary that US politicians had held the rest of the world hostage in the crisis.
But Beijing welcomed the agreement, saying it will contribute to global economic stability.
#2 Oct 17, 2013
Is this the begining of the great economic cascade or stampede?
It this the day we said it began in history?
I'll bet you the winds of this caused the temporary agreement...
#3 Oct 17, 2013
The corporate philosophy at the top of their front page:
“Value only truth, Credibility and Fairness”
#4 Oct 17, 2013
Dagong Downgrades the U.S. Sovereign Credit Ratings to A- Dagong Global Credit Rating Co., Ltd.
Time：2013-10-17Sour ce：dagongEditor ：Print Font Size： BigNormalSmallClick Rate：842
On October 16, 2013 EST, the U.S. Congress approves the resolution to end the partial government shutdown and raise the debt ceiling. By such means the U.S. Federal Government can avoid the default crisis for the moment. However the fundamental situation that the debt growth rate significantly outpaces that of fiscal income and GDP remains unchanged. For a long time the U.S. government maintains its solvency by repaying its old debts through raising new debts, which constantly aggravates the vulnerability of the federal government’s solvency. Hence the government is still approaching the verge
of default crisis, a situation that cannot be substantially alleviated in the foreseeable future. In light of these facts, Dagong Global Credit Rating Co., Ltd.(hereinafter referred to as “Dagong”) decides to downgrade the local and foreign currency credit ratings of the U. S., which has already been on the negative watch list, to A- from A, maintaining a negative outlook. The rationale that supports
the conclusion is as follows:
1. The partial U.S. federal government shutdown apparently highlights the deterioration of the
government’s solvency, pushing the sovereign debts into a crisis status. The U.S. federal government
announced its shutdown on Oct. 1, 2013, a radical event that reflects the liquidity shortage aroused by depleting stock of debts without the increase of new debts, directly resulting in the federal government lack of the funds for its normal function. The partial U.S. government shutdown is an inevitable outcome of its long-term failure to pay its excessive debts. During the fiscal years from 2008 to 2012, the ratio of the federal government’s stock of debts to fiscal income increased from 4.0 to 6.6. Under such circumstances, the federal government that can hardly sustain its own expenses, not mentioning collecting reliable income to cover its huge amount of debts. Substantial decrease of the U.S. government’s solvency is proven by this shutdown incident, which pushes the federal government into a crisis position of debt cliff and default.
2. 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. 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. The federal government debt stock increased by 60.7% between 2008 and 2012 when the nominal GDP increased by only 8.5% while the fiscal income decreased by 2.9%, which indicates that fiscal income is losing its means as the primary source of debt repayments. Because of the fact that the federal government now depends highly on borrowing new debts to repay its old ones, vulnerability of its debt chain is accumulated so that technically debt default may occur at any time. For the fundamentals of government debt repayment condition will not be essentially improved, the federal government's debt cliff will persist in the long term.
#5 Oct 17, 2013
3. Liquidity has been continuously injected into international financial markets from the U.S., which indirectly plays a key role in combating against the risk of government default. This implicit debt default behavior infringes upon the benefits of creditors. In order to avoid the debt default caused by the lack of debt repayment sources such as fiscal incomes, the U.S. government has been taking advantage of the international currency dominance of the U.S. dollar to monetize its debts and has been taking
quantitative easing monetary policy to maintain its government solvency since 2008. The devaluation of the stock of debts hereby directly damages the creditors’ interests. Dagong estimates that the depreciation of the U.S. dollar caused a loss of USD628.5bn on foreign creditors over the years of 2008 to 2012.
4. The debt ceiling has been extended continually, increasing the total amount of the federal government debts. In order to avoid the sovereign debt default, it becomes an inevitable choice for the U.S. government to repay its old debts through raising new debts. The fact that the debts grow faster than the fiscal incomes will further impair the federal government’s solvency. Ever since Obama’s inauguration in 2009, the U.S. Congress has extended the debt ceiling for five times, reaching a total volume of USD5.1tn. This further raise of the debt ceiling shows the government’s incapability of improving its solvency by improving the basic economic and fiscal elements.
5. The Democrats and the Republicans of U.S. do not have a consistent strategy target to solving thesovereign debt problem. As the issue of paying sovereign debts falls into a tool that the parties make use of to realize their own interests, the political environment is unfavorable for eliminating the risk of its sovereign debt default in the long term. The recurrence of the bi-partisan conflict over debt ceiling once again reveals the U.S. superstructure’s incapacity to solve national debt crisis. A debt crisis evolves into a political crisis, which in turn exacerbates the debt crisis. Such political environment over debt repayment renders the dim and pale prospect of the U.S. federal government’s solvency.
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