China's Dagong Lowers U.S. Credit Rating on Fed Monetary Policy

Nothing I can add here.

Dear Friends,

This is the Chinese equivalent of the US rating agencies that have been hammering the world. In the present conditions it does have significant clout.

The fact that the US Fed exceeded the 500 billion level laid down a gauntlet. It is for economic and political reasons now that the Fed cannot back down from their position. In fact the austerity measure that others have taken threatens an immediate opening of a black hole sucking the euro zone down.

QE is not correct but QE to infinity will be the Western Worlds play. Only china will stand tall.

The market is questioning the Fed resolve on QE today because of today's 10 year US Treasury auction participant results. It is just such a threat that calls for QE to infinity, but I would suspect that this is too refined for analysts interviewed to understand.

Gold is going to $1650 and beyond. Speculation that the Fed will back off on QE is misplaced and wrong.

They can't.

Jim

China's Dagong Lowers U.S. Credit Rating on Fed Monetary PolicyNovember 09, 2010, 1:41 PM EST
By Joshua Fellman and Ye Xie

Nov. 10 (Bloomberg) -- China's Dagong Global Credit Rating Co. reduced its credit rating for the U.S. to A+ from AA, citing a deteriorating intent and ability to repay debt obligations after the Federal Reserve announced more monetary easing.

The credit outlook for the U.S. is "negative," as the Fed's plan to buy government debt will erode the value of the dollar and "entirely encroaches" on the interests of creditors, analysts at Dagong, one of China's five official ratings companies, said in a statement. The U.S. is rated Aaa and AAA by Moody's Investors Service and Standard Poor's Corp., the highest credit ratings of the New York-based companies.

The downgrade came before a meeting of Group of 20 leaders this week in Seoul and as the U.S. steps up pressure for China to let the yuan strengthen to help reduce the U.S. trade deficit. China countered the criticism by saying U.S. economic policies threaten the stability of developing nations.

"The general market perception is that there's a risk that the Chinese rating agency is playing a bit more political game than providing independent analysis," said Ian Lyngen, a government bond strategist in Stamford, Connecticut, at CRT Capital Group LLC, in a telephone interview. "I don't think it has the same ramification as a downgrade by mainstream rating agencies such as S&P and Moody's. That said, the reasons that the credit rating of the U.S. may come under pressure are obvious to most people."

Source: businessweek.com