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China Calls Our Bluff: "The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation but [U.S.] Rating Agencies Still Give it High Rankings"
America's biggest creditor - China - has called our bluff.
As
the Financial Times notes,
the head of China's biggest credit rating agency has said America is insolvent and that U.S. credit
ratings are a joke:
The head of China’s largest
credit rating agency has slammed his western counterparts for causing
the global financial crisis and said that as the world’s largest
creditor nation China should have a bigger say in how governments and
their debt are rated.“The western rating agencies are
politicised and highly ideological and they do not adhere to objective
standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating,
told the Financial Times in an interview.***
He
specifically criticised the practice of “rating shopping” by companies
who offer their business to the agency that provides the most favourable
rating.In the aftermath of the financial crisis “rating
shopping” has been one of the key complaints from western regulators ,
who have heavily criticised the big three agencies for handing top
ratings to mortgage-linked securities that turned toxic when the US
housing market collapsed in 2007.“The financial crisis was
caused because rating agencies didn’t properly disclose risk and this
brought the entire US financial system to the verge of collapse, causing
huge damage to the US and its strategic interests,” Mr Guan said.Recently,
the rating agencies have been criticised for being too slow to
downgrade some of the heavily indebted peripheral eurozone economies,
most notably Spain, which still holds triple A ratings from Moody’s.There
is also a view among many investors that the agencies would shy away
from withdrawing triple A ratings to countries such as the US and UK
because of the political pressure that would bear down on them in the
event of such actions.Last week, privately-owned Dagong
published its own sovereign credit ranking in what it said was a first
for a non-western credit rating agency.The results were very
different from those published by Moody’s, Standard & Poor’s and
Fitch, with China ranking higher than the United States, Britain, Japan,
France and most other major economies, reflecting Dagong’s belief that
China is more politically and economically stable than all of these
countries.Mr Guan said his company’s methodology has been
developed over the last five years and reflects a more objective
assessment of a government’s fiscal position, ability to govern,
economic power, foreign reserves, debt burden and ability to create
future wealth.“The US is
insolvent and faces bankruptcy as a pure debtor nation but the rating
agencies still give it high rankings ,” Mr Guan said.***
A
wildly enthusiastic editorial published by Xinhua , China’s official
state newswire, lauded Dagong’s report as a significant step toward
breaking the monopoly of western rating agencies of which it said China
has long been a “victim”.“Compared with the US’ conquest of the
world by means of force, Moody’s has controlled the world through its
dominance in credit ratings,” the editorial said...
China
is right. U.S. credit ratings have been less than worthless. And - in
the real world - America should have been downgraded to junk. See this,
this,
this,
this,
this,
this,
this,
this
and this.
China
is not shy about reminding the U.S. who's got the biggest pockets. As
the Financial Times quotes Mr. Guan:
“China is
the biggest creditor nation in the world and with the rise and
national rejuvenation of China we should have our say in how the credit
risks of states are judged.”
Might Makes Right
Economic Collapse
Indeed, Guan is even dissing America's
military prowess:
“Actually, the huge military
expenditure of the US is not created by themselves but comes from
borrowed money, which is not sustainable.”
As I've
repeatedly shown,
borrowing money to fund our huge military expenditures are -
paradoxically - weakening our national security:
As
I've previously pointed
out, America's military-industrial complex is ruining our economy.
And
U.S. military and intelligence leaders say that the economic crisis is
the biggest national security threat to the United States. See this,
this
and this.
[I]t
is ironic that America's huge military spending is what made us an
empire ... but our huge military is what is bankrupting us ... thus
destroying our status as an empire ...
Indeed, as I pointed
out in 2008:
So why hasn't America's
credit rating been downgraded?Well, a report
by Moody's in September states:
"In superficially
similar circumstances, the ratings of Japan and some Scandinavian
countries were downgraded in the 1990s.
***
For reasons
that take their roots into the large size and wealth of the economy and, ultimately, the US military power,
the US government faces very little liquidity risk — its debt remains a
safe heaven. There is a large market for even a significant increase
in debt issuance."So Japan and Scandinavia have
wimpy militaries, so they got downgraded, but the U.S. has lots of
bombs, so we don't? In any event, American cannot remain a hyperpower
if it is broke.
The fact that America spends
more than the rest of the world combined on our military means that we
can keep an artificially high credit rating. But ironically, all the
money we're spending on our military means that we become less and less
credit-worthy ... and that we'll no longer be able to fund our military.
The
Scary Part
I chatted with the head of a small investment
brokerage about the China credit rating story.
Because he gives
his clients very bullish,
status quo advice, I assumed that he would say that China was wrong.
To
my surprise, he simply responded:
They're right.
What's scary is that China knows it.
In other words,
everyone who pays any attention knows that we're broke. What's scary is
that our biggest creditor knows it.
Tricks
Up Their Sleeves?
China has been threatening
for many months to replace the dollar as the world's reserve currency
(and see this).
And China, Russia and other countries have made a lot of noises about
replacing the dollar with the SDR. See this
and this.
Gordon
T. Long argues
that the much talked about gold
swaps are part and parcel of the plan to replace the dollar with
the SDR. Time will tell if he's right.
China, of course, is not without its own problems. See this and this.
In related news, Germany's biggest companies are starting to shun Wall Street as too risky.
»
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we are bankrupt but commie china is more bankrupt.
My Dads more bankrupt than your Dad . Nanee Nanee Nanee!!
Interesting theory. When Argentina tried this they called it Hyperinflation. Get over your fantasies of American exceptionalism. The law of gravity DOES apply to US too.
Interesting you mention Argentina. Many people consider Argentina the test case.
No sir, Such a calamity can never occur
All human beings are anointed to accept doellarrs at birth!
And this statement is rated AAA by holy trinity
Sarcasm off/
There are limitations to everything and the US cannot print unlimited amounts of money. How you arrive to a conclusion that is so illogical is beyond me. And how does China have a higher inflation risk? Just as a warm up exercise - we have and are continuing to import goods that are 30% perecent cheaper than they should be because of currency imbalances. The US has been underpaying for necessities and asian imports for years. The pipedream is inching close to and end.
The inflation risk is all in the US. China will allow the Yuan to appreciate. That increases prices of Chinese goods in the US - and that's a hell of alot of goods! That Yuan appreciation also makes all US assets cheaper for the Chinese to acquire. All those dollars we've been sending them on those empty freighters will come flooding back to our shores as the Chinese race to buy everything and anything they can before the dollars they own become as worthless as the ones we will be stuck with.
The Chinese must know the simple truth about their currency appreciation and as such are certainly planning which is the reason they are not allowing the yuan to move much - yet. When they do - it's over.
That's price inflation, not to be confused with monetary inflation...
Indeed Seer, but price increases are one helluva straightforward trailing indicator, not to be confused with hocus pocus, like CPI since the '80s.
Regards
I would call it price inflation caused by monetary inflation. Eventually the monetized dollars get spent/ return home. Voila! More dollars chasing the fixed set of goods.
2x entry
With respect, the printing of credit notes (money?), without the intent of settlement, denotes (technically or otherwise), bankruptcy. Print as much as you like, you are only issuing more of the same fraudulent IOUs. Worse than Commies.
And this should be worthy of a weekend writeup, it is from your favorite source:
OIL SPILLS, SINK HOLES ARE CONNECTED. THE HOLLOW EARTH IS COLLAPSING UPON ITSELF.
http://www.godlikeproductions.com/forum1/message1141342/pg1
Then be sure to stay up for this
ART BELL HOSTS COAST TO COAST AM TONIGHT ON OIL SPILL! Quote [link to www.coasttocoastam.com] ART BELL HOSTS COAST TO COAST AM TONIGHT ON OIL SPILL! Quote [link to www.coasttocoastam.com] ART BELL HOSTS COAST TO COAST AM TONIGHT ON OIL SPILL! Quote [link to www.coasttocoastam.com] ART BELL HOSTS COAST TO COAST AM TONIGHT ON OIL SPILL! Quote [link to www.coasttocoastam.com] ART BELL HOSTS COAST TO COAST AM TONIGHT ON OIL SPILL! Quote [link to www.coasttocoastam.com]ART BELL HOSTS COAST TO COAST AM TONIGHT ON OIL SPILL
http://www.coasttocoastam.com/show/2010/07/23
EPA Whistleblower Accuses Agency of Covering Up Effects of Dispersant in BP Oil Spill Cleanup
http://www.youtube.com/watch?v=sGbz7Ec1xrI
And I just had another idea that you can work in for some more conspiracy,
The reason that the ROVs are using those lights down there is because BP and the USCG have figure out how to block the sunlight from shining on the BOP so that you are not able to see what is really going on. Those pictures could be from a well off the coast of Vietnam. Probably just one of the dry holes drilled over there that they are using for a prop. Why would they show you the real thing if they could fake it with a prop? There are probably divers in special secret high pressure suits down on the real well hooking it up for production.
The odd thing is the vast army of conspiracy "nuts" really do report on the "facts". They may interpret them within their own framework, but the basics are there for the discerning individual.
Right now it is safer to trust the nuts because at least you know where they stand and they are not egtting paid for propaganda.
Now that is one great comment, Gully Foyle.
And with all those "think tanks" and foundations out there (over 50,000 in America alone) and the US Chamber of Commerce being nothing more than a multinational with subsidiaries around the planet (now why would the head of one subsidiary, the Venezuelan Chamber of Commerce, replace President Hugo Chavez in the last US-attempt on his government?), it becomes exceedingly more difficult to differentiate between truth and fiction.
Study forensic economics and forensic accounting and the truth shall set ye free....
Study forensic economics and forensic accounting and the truth shall set ye free....
Bingo! Cui Bono? (and interestingly enough, no attempt was made to follow the money trail on 9/11- clear sign that those closing the door have a stake in the door staying closed, the real crime not being investigated)
...no attempt was made to follow the money trail on 9/11- clear sign that those closing the door have a stake in the door staying closed, the real crime not being investigated
Well said Seer.
I would also suggest that in the case of the spill the real truth (matt simmons vs. et al) will eventually come out. No amount of propaganda, psyops, nuttiness, etc., needed. It's all sitting at the the bottom of the gulf - or not. In this case, time will tell. Too many people with a vested interest in finding out the truth. No?
edit: sorry for adding to the ot
You must have an exciting life, considering how riled you appear when GW posts an article.
But, alas, your comprehension skills seem lacking. This article is not about oil.
everything is about energy... no exceptions, ever. as for someone posting GoM / BP stuff here... well when Halliburton is the good guy in the story... that should be a clear indication to how fucked up it really is, no? As a Floridian, as a State that carries the spending needs of the Country more than the rest of the idiots... I am happy to see someone fired up... Drill Baby Drill... may your children burn before your very eyes, again and again.
Geo Wash, I wanted to make certain that you could find this:
Is Matt Simmons Credible?
http://www.consumerenergyreport.com/2010/07/23/is-matt-simmons-credible/
Thanks Augustus,
I only knew about his false prophecy about the Saudi oil peak and his current ridiculous claims. With these other accounts I think it paits a clear picture of an old has-been, eager to be in the spotlight. Meanwhile, Bonnie is barely a tropical depression and the ecological disaster is still just a dream for the doomists who can't understand the vast size of the ocean and that the gulf current greatly dilutes the oil.
the gulf current greatly dilutes the oil
OK MR. Scientist, what's a safe PPM? And, are you willing to bet the future of our food on it?
I suppose that algae blooms caused by nitrogen runoff aren't an issue either, is that right?
Augustus, this post is not on the oil spill, b ut on economics, so your comments are off-topic. However, since you are bringing it up, here are a couple of Simmons' claims, with my tentative, current thinking about whether I agree or disagree with it (I'm too busy to hit them all or go into detail tonight):
1) We should nuke the well. No, I'm against it.
2) BP will go to 0. Maybe, or maybe BP will be considered "too big to fail" and propped up. Alternatively, it will escape liability for much of what it did, sell of assets and survive.
3) We should evacuate the Gulf: I don't know, but Dr. Ricki Ott and Senior EPA analyst Kaufman think we should.
4) Oil lake in gulf. I don't know. But NOAA has just announced oil traces 30 meters thick stretching for quite a ways:
http://www.noaanews.noaa.gov/stories2010/20100722_jag.html
http://www.palmbeachpost.com/news/deep-sea-plume-in-gulf-changes-concept-of-820243.html
http://www.nytimes.com/2010/07/24/science/earth/24plume.html?_r=1
http://www.wtsp.com/news/topstories/story.aspx?storyid=137989&catid=250
5) Second, bigger leak miles away, BOP not where ROV cams have focused, gaping hole spewing oil, etc. I have no idea. I have seen NOTHING to corroborate this. I see alot of people trying to find evidence for Simmons' theory. I have not seen ANYTHING which corroborates this (but I haven't finished digesting the arguments in this thread). However, given the incredible attempts to cover up the extent of the damage by BP and the government, before we can say one way or ther other, I honestly think we need to discover facts like:
(A) as a whistleblower previously told 60 Minutes, there was an accident at the rig a month or more prior to the April 20th explosion:
Where did this incident occur? Was there any leak of oil, or only loss of equipment into the mud? Have the ROVs/seismic/sonar etc. take a peek at this location to make sure everything is good?
(B) As Bloomberg reports, problems at the well actually started in February:
BP Plc was struggling to seal cracks in its Macondo well as far back as February, more than two months before an explosion killed 11 and spewed oil into the Gulf of Mexico.
It took 10 days to plug the first cracks, according to reports BP filed with the Minerals Management Service that were later delivered to congressional investigators. Cracks in the surrounding rock continued to complicate the drilling operation during the ensuing weeks. Left unsealed, they can allow explosive natural gas to rush up the shaft.
“Once they realized they had oil down there, all the decisions they made were designed to get that oil at the lowest cost,” said Peter Galvin of the Center for Biological Diversity, which has been working with congressional investigators probing the disaster. “It’s been a doomed voyage from the beginning.”
***
On Feb. 13, BP told the minerals service it was trying to seal cracks in the well about 40 miles (64 kilometers) off the Louisiana coast, drilling documents obtained by Bloomberg show. Investigators are still trying to determine whether the fissures played a role in the disaster.
WHY do investigators think fissures back then might have played a part in the April 20 explosion and blowout?
By the way, here is a brilliant possible explanation for the gas seep 3 km from the blown out well.
In fact, if this claim ends up being false, then Simmons might be senile or - given the amount of media play it has received - I will chalk it up to be a disinfo campaign. What is psyops? Well, as I wrote last year about government-sponsored psyops:
Simmons is obviously NOT SOBER most of the time, especially on his phone Bloomberg interview, claiming BP was history, BK, costing them $over $1 Trillion to cleanup... He then disclosed he was short BP but never shorted a stock in his life, ask him how much he lost so far. A clown.
cleanup on the gulf...
http://blogs.alternet.org/speakeasy/2010/07/22/strippers-booze-and-race-riots-bps-cleanup-workers-run-amok-in-grand-isle/
With all due respect, Rawstory IS a propaganda site. In my opinion all off net broadcasting is propaganda and it is fairly well known that much of what is on the net is as well. Rawstory is especially inept at attempting to appear as some sort of 'true source' however and I find it useful only for sniffing out attempts to mislead and to create 'buzz' based upon deceptions.
ISEEIT
Dude everything is propaganda, even ZH.
There is no media that is totally objective, and there never has been.
Factually they are all porn where we derive our individual kicks. Like porn the design is to appeal to our base and biased nature.
GaJillion Points for you Gully!
I 'feel' what you say, but I don't completely agree. Propaganda is allowed on ZH. That's because ZH isn't a little punk. I reject the defeatist 'all is lost', 'tap out' crap. We are tired, we are depressed, we are disgusted, but we are not beaten. I understand that sounds like a sell point for a really shallow movie; I also believe it to be true.
We could fight endlessly over all sorts of not survival dependent philosophical/ideological (religious) differences, or we could stop getting sidetracked, diverted, and focus on the real enemy.
That enemy is a political/corporatist marriage. An unholy alliance. A sick perversion of what America was established to be.
I wish that I had 1/2 of Marla's education. That intellectually beautiful human Lay's it out like God.
I disagree that it is all propaganda. You can find some truth on the net and in print and definitely on ZH.
IF we can agree to define propaganda as 'a deliberate, conscious, decision to mislead, misinform,& misdirect, with the intent being malevolent by choice and design; then we might also be able to figure a way to counter this assualt.
As far as your "all is propaganda" goes; I say bullshit. We must be allowed to make distinctions and we must not allow the Left to define /reduce us into their trap. Paradox is a good thing and if you give it up for the folly of appearing 'fair' or 'enlightened' you will be road kill.
These people are not nice, Nor does honor as you would recognize it exist in their 'little book of procedures'.
Take a look at history's major confrontations, ALL have resource-grab at their core. Very few people will dispute that that's what's going on with the US's (illegal) wars in Iraq and Afghanistan: yes, there's tangential good-guy/humanitarian fluff that's out there, but that is NOT why the wars were undertaken (that stuff was just marketing BS).
As much as I agree with your point about the enemy being the marriage of corporations and politics (isn't that fascism?), it's still not THE fundamental cause. Efficiencies in doling out resources requires this. As resources dwindle more and more control is needed in order to keep the system going forward, though it will meet its demise just like all past empires- resource exhaustion takes out corporate and political control.
In general review of GW's post, it is correct now and for a few years, until China's energy contracts wear thin. Most people miss the point that China has been subverted by the West; this has been the plan all along; unfortunately this success will backfire, traces of this are now obvious in China garnering access to more and more energy, thereby placing further strain on US energy requirements- China will also build an infrastruture totally dependent on non-renewable resources- their future is absolutely knowable.
Very well said, thanks.
This is just political BS from the Chinese. We are not broke. We own the Goddamn printing presses that are debt is based in. Does anyone actually believe their credit ratings agencies are any less politically connected or less idealogical than ours. Nigga PLeeaaaseeee
@Ando,
Racist comment!
Mel gibson , please take note
That 'word' is a commonly used word, not necessarily used by you alone
what a Pity! Never say anything about media and Jews [same]
Got it!!!!
Which would you rather be? The deadbeat? Or the person the deadbeat owes money?
In the end they're both broke. The deadbeat doesn't have money, and the lender won't get his money. The difference is, the deadbeat got to enjoy spending it.
How's the saying go... "If you owe a thousand to the bank and cant afford to pay, you're in trouble. If you owe 15T to the bank and cant affor to pay, the banks in trouble." ... or something like that.
+1
We will print are debt away.
You got that right. All those dollar bills are backed by the best army in the history of man. We print'm, they take'm and they'll like'm. What else are they going to use?
All these Chinese is going to number 1 crap are just crap. Their average income is $2K. The chinese history are full of corruption. All their dynasties were brought down by corruption. This one will ended up the same. The Japanese are dying off on their own. The Indians? They've got even more problems than the Chinese. Who else is there?
America is number one as far as eyes can see.
America is a bullshit, shit hole thanks to govt policies that reward sloth, penalize productivity, and state sponsor wholesale theft and rape of the taxpayer.
My opinion is that ONLY people that pay taxes, and can prove it by show of 1040 at the polls should vote. That being true, these fuckers would have been out of office, long ago.
You can vote in anyone you want, but the lobby paying 10 times what you do as a tax payer still will effect any legislation presented and / or passed... as for discussing what makes the cow moo loudly... sure the beltway gang has herding down to a fine science.
Every other "Best army in the history of man" has been defeated, but this time will be different, right?
As to your dollar comments; China will use another form of value exchange. Maybe gold, maybe another currency. It doesn't matter, they'll throw all their greenbacks back at the US and it'll be lights out for the US.
Your comments perfectly illustrate Economic Darwinism's point.
The BRIC's have, as of late been making no such secretive pushes for another currency which they would have more control over... to no avail, China's coming slow down which has already shown its teeth will cause yet again another flight to safety in dollars... as much as is truely wrong with the U.S. dollar, as compared to the rest of the world it is a gem... in the World opinion if not yours.
http://www.reuters.com/article/idUSTRE5512N620090602
http://biz.thestar.com.my/news/story.asp?sec=business&file=/2010/7/20/business/20100720141809
I suspect you are missing the big picture, adem.
The US military is protecting Chinese companies over in Afghanistan who are mining copper their for their own factories and production facilities which produce all those products for the multinationals to sell back to their individual countries' clueless citizenry.
China receives the vast majority of the oil produced in southern Iraq (trivia question: which country invaded Iraq for that oil?).
That pipeline being built to transport gas and oil from the Caspian across Afghanistan ends in India for a reason: they require that gas and oil for those multinational factories and production facilities there.
Beginning to get the big picture now......
CPC has over a billion people from which to draw an army. Most of them men. Physically smaller perhaps than your average hormone fed USian sure, but the Chinese invented gunpowder...IE they can afford to guard a pipeline or two.
Regards
This is a joke, right?
I used to work at one of the world's largest and most well respected (if not most well known among the general population... they do not advertise) asset management firms based in the US with offices worldwide.
One of the reasons I left (there was more than one) was that I became disillusioned. How can such a great group of investors, economists, and political analysts, get things so utterly and completely and (to me) obviously wrong?
I have now moved to Asia and am working at one of the largest asset managers in China. I am a caucasian California kid. I grew up in the valley. Spicoli is one of my all-time favorite movie characters. But I want my 5-year old daughter growing up speaking Mandarin because that is where the economic (and probably military) power will be 20 years from now.
I pretty much agree with the premise of your article. It is one reason I moved to China. However, I have one small issue with one small comment:
"What's scary is that our biggest creditor knows it."
Now why would you think China doesn't know this? Most of the intellectual brain power today resides in China. Not the US. There is a serious reverse brain drain going on now. I'm part of it, but several of my friends, who are professors at University of California campuses are also moving to Asia. My PhD advisor from a top (the top) US university is now dean at a university in China. Several of my clasmates have moved back to China.
The scary thing is that people in the US and Europe grossly underestimate the knowledge and skill of the people (Chinese) they are competing against.
Please ask China if they will accept some more of our brightest Phd's for the brain drain. I offer them Bernanke, Obungle and Summers. I'll throw in Geithner for some more pick up basketball and comic relief. Please take all of these 4 good luck charms. The 4 of them bring us such good luck, we should share it.
I assume you understand the significance of the number 4.
They won't take them. The Chinese are not stupid.