Chinese agency downgrades US credit rating

Will this mean the Chinese government stops buying U.S. Treasuries? No. It's nothing more than an international political ploy with monetary benefits. They think they can force the interest payout on the notes, bills, and bonds to go up if they downgrade the U.S. credit rating. Danong carries very little influence in the international financial community, however, so it becomes nothing more than a cheap shot.

 

Debt Ceiling Resolution Bears Fruit

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....

http://www.france24.com/en/20131017-chinese-agency-downgrades-us-credit-rating

 

#1 Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.

#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency. This agreement will result in a lot less U.S. dollars being used in trade between China and Europe...

The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."
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#3 Back in June, China signed a major currency swap agreement with the United Kingdom. This was another very important step toward internationalizing the yuan.

#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.

#5 Mei Xinyu, Commerce Minister adviser to the Chinese government, warned this week that if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.

#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar...

There have been media reports this week that China's State Administration of Foreign Exchange, the body that handles the country's $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.
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#7 Xinhua, the official news agency of China, called for a "de-Americanized world" this week, and also made the following statement about the political turmoil in Washington: "The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized."

#8 Xinhua also said the following about the U.S. debt deal on Thursday: "[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system". The commentary in the government-run publication also declared that the debt deal "was no more than prolonging the fuse of the U.S. debt bomb one inch longer."

#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations. But instead of slowing down, the Chinese appear to be accelerating their gold buying. In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold. There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.

http://www.zerohedge.com/news/2013-10-18/9-signs-china-making-move-against-us-dollar

 

I remember reading an article several years ago concerning China planning for the post USA economic global era. Looks like they are moving forward with what they planned at that time.

Guess where their economists earned their education? Right the USA and they are applying what they learned. Too bad our politicians are not educated in economics as well as other areas.

Every thought about the fact that teachers have to provide credentials for their jobs, but Senators and Representatives have no requirements ... other than citizenship and age?

 

Their economy is in as bad, if not worse, shape than ours. Dream on.

 

What information brings you to that conclusion?

 

http://www.forbes.com/sites/stratfor/2013/07/23/the-end-of-the-chinese-economic-miracle/

 

Good for you. I was not sure you had read anything or had any supporting data. I agree they have big problems, both economic and social. But that does not negate the reality that they have been planning on steps to counter the decline of the US economy. It is possible they miscalculated. However their economists were educated in the US.

Also 3D printing is going to put a huge dent in their manufacturing.

 

http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html