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The U.S. Treasury or any sub-prime borrowers, but it is no longer a top-tier credit is. It took a Chinese company, to finally get out and say it.

Dagong made international headlines Rating Co. in July 2010 when it gave the United States a lower credit rating than it assigned to up-and-coming China. But that is beside the point. Dagong that says he wants the monopoly that Western firms have had to be rated debt rating, the pauseBonds from 50 nations and a dozen countries were better credit scores than it transferred to the United States - making it the first large agency to grant Washington a low rating as a Triple-A.

In Dagong opinion, the United States earned only one double-A rating, with a "negative" outlook on the future downgrades notes if we fail to act to our financial policy jointly. Moody's, Fitch and Standard & Poor's all maintain their traditional triple-A rating on Treasury obligations, although theyare grumbling at the start of our government's financial irresponsibility.

Credit ratings are opinions, not Delphic predictions. A triple-A credit rating would mean that the rating agency sees no credit risk in practice under all circumstances short sentence of a meteorite impact or a nuclear war. Ratings below triple-A are the raters attempt to quantify the degree of risk presented by a less-than-perfect borrowers.

There is no such thing as a "right" opinionof credit risk. We can only judge whose opinion is more credible and more consistent with the known facts.

So, let's consider this for us. Given the U.S. government $ 13000000000000 accumulated debt, its continuing 1000000000000 $ yearly deficits, his failure to be referred to approach a fast explosion of entitlement spending, and their almost total state of political stalemate, which is more credible: the United States an exemplary borrower or is it not?

Dagong it does not sayin my view, makes more sense than the other agencies insistence that this country remains one of the bets world's safest.

In its recent report stated that their ratings Dagong a nation's ability to repay debt stress by the generation of future income, rather than through a refinancing of old loans with new loans. The recovery may be difficult or impossible if the financial markets lose confidence in the borrower, are Dagong notes. We need only the latest example of Greece to see to see thisfor us.

The United States, alone among the economies of the world, has a third way to repay his debts - by printing more dollars. The greenback's global role as the primary reserve currency makes that possible. This means, essentially, so that the United States should never, default its debt because it may simply create the money to pay what it owes. The Western rating agencies could always be justified on this point to their continuing triple-A ratings, though it would be an embarrassingApproval.

Printing money willy-nilly is a recipe for disastrous inflation and devaluation. Creditors would be paid back, but they would in dollars, whose value was reduced so that the creditors, although nominally be repaid whole, would suffer considerable damage in the real world. Dagong credit implicitly recognizes this inflation risk.

Dagong said China, with its rapidly growing economy, huge trade surplus and huge foreign exchange reserves, earned a rating of Double-A +.Canada is the same note. The Triple-A countries are Switzerland, Singapore, Australia, Denmark, Norway, Luxembourg and New Zealand. Saudi Arabia gets a double-A rating as the United States, but firm with a "stable" outlook.

Another worrying aspect is the influence Dagong report to officials, China's foreign exchange reserves, which can also invest a total of over $ 2 trillionth lent Right now, much of that money back to the United States. One Chinese pullback in such lendingprobably would force the Treasury to significantly higher interest on its debt, which will only exacerbate our federal budget deficit and - without cuts - pay more borrowing power, in an evil and unsustainable cycle.

Dagong study is not without its own prejudices and baggage. As a Chinese company, it is less able than Western companies, to evaluate free and open to political risks, particularly in the vicinity of home.

Dagong's Double-A + rating and outlook "stable" glosses for his homelandabout the rigidity of the political system in China and the strict controls of the nation's leaders in the free flow of information. This rigidity leaves China vulnerable to unpredictable social upheaval, as in the last year of unrest in Xinjiang. Dagong has very little space to assess such risks. One would search in vain report of the company, including a reference to the Tiananmen Square.

That is, Dagong Chairman Guan Jianzhong had a point in a recent statement. (1) "This marks a new beginning forReform of the international rating system irrational, "he predicted.

Dagong has spoken loudly about something that our own analysts see it, but are not prepared to say. The emperor may have some clothes, but they are certainly full of holes.

Sources:

(1) Bloomberg: China wins higher rating than the U.S. debt in the first report of the Chinese company

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