Chinese Rating House Claims US is in Debt Default
Dagong Global Credit Rating Co. Ltd., the sole Chinese agency giving sovereign credit ratings, is of the opinion that the United States is currently in default with outstanding debt. They say this has continued to occur due to the US allowance of the dollar to continue to weaken against other currencies, thus eroding the wealth of US creditors, like China.
Beijing recently urged the Obama Administration to get a handle of the fiscal situation and the debt crisis before a massive default occurs. Many countries have lost faith in the US dollar causing more insecurity by foreign investors and driving prices ever higher around the world. China, who holds most the largest portion of US debt, in the form of treasury bills used to secure the loans made by China to the US to pay for the creation of a larger money supply, has continued to offload the amount of US debt it holds.
Rating giants Moody’s, Standard & Poor’s, and Fitch have all warned that the US could lose it first-class rating if the current debt ceiling is not raised, a move that the Republican controlled House is will not allow unless an agreeable deficit cut takes place. If the US is downgraded, it could dramatically increase the costs for the US to borrow, deepen the US economic depression currently underway, and cause even more insecurity in the international world concerning the status of the US dollar as the world’s reserve currency.
Several countries, including China, Russia, and Brazil, have already called for a plan to remove the US as the world reserve currency in an official meeting with the International Monetary Fund (IMF). Should this take place, the US could see an era of hyperinflation that has not been witnessed since pre-World War II Germany and the Weimar Republic.
