Tuesday, November 9, 2010

China downgrades U.S. again

Dagong credit of China downgrades U.S. again to A+ from AA. http://bit.ly/cYYheu

"In essence, the U.S. government's move to devalue the dollar indicates its solvency is on the brink of collapse," said the report.

"Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors."

"Dagong believes that the occurrence and development process of the credit crisis in the U.S. resulted from the long-standing accumulation of the contradictions in its economic system; the U.S. debt burden can be relieved only to a certain extent through large-scale printing and issuance of the U.S. dollar; however the consequent decline of the U.S. dollar status and national credit will block the debt revenue channel which is vital to the existence of the United States to a greater extent. The potential overall crisis in the world resulting from the U.S. 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 U.S. 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."

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