US Sovereign Debt Downgrade from Dagong Global Credit Rating Co

 

Today Dagong Global Credit Rating Co. Ltd, an emerging Chinese credit-rating agency, downgraded US sovereign debt to A from A+.  Far from the S&P, Fitch and Mood's AAA rating, the Dagong rating won't be taken too seriously at this time.  To put the large discrepancy in perspective, the definition of AAA and AA on Fitch's International Issuer and Credit Rating Scales, the Issuer Default Ratings (IDRs) are only different in that AAA denotes the maximum level of credit.  The actual definition is mere lip service.  Dagong's definitions are very similar to those well known to us already. 

Dagong Global ratings definitions

This downgrade comes on the heels of a downgrade from AA to A+ in November 2010 after the Federal Reserve announced it would stimulate the bond market with QE2.

The report states: "By raising the debt limit the US temporarily prevents the government from debt default but it does not improve the national solvency; rather the heavier debt burden on the government will cause the US sovereign debt crisis to further deepen."

The report echos my sentiment with this next excerpt: "The pace of the US deficit cut is far lower than that of new debt growth and the fiscal policy of revenues falling short of expenditures will surely keep pushing the US government debt to a higher level. The deficit cut objective approved by the Congress matches the size of raised debt, yet there is an eight-year difference between the two objectives."

The report can be read here.

I found their four major points to be quite logical and compelling.


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Comments

  1. AnonymousAugust 5, 2011 at 11:28 PM

    Great article! tanx

    ReplyDelete
  2. FredAugust 5, 2011 at 11:29 PM

    Interesting report thanks for the link.

    ReplyDelete
  3. AnonymousAugust 6, 2011 at 12:04 AM

    Lehman bros went under and virtually nothing happened. Nothing for the common person on the street that is. Goldman Sachs could have gone under with the same non effect

    ReplyDelete
  4. Think Tank ENTAugust 6, 2011 at 5:12 AM

    @anonymous Thank you,, it is getting around I saw the other day i got linked on the dailypaul
    http://www.dailypaul.com/172607/us-sovereign-debt-downgrade-from-dagong-global-credit-rating-co

    ReplyDelete
  5. Think Tank ENTAugust 6, 2011 at 5:14 AM

    @Fred Thanks, in a way Dagong has good timing, downgrading right before S&P.

    ReplyDelete
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