USA Credit Rating Downgraded

We knew that it was only a matter of time before parts of the rest of the world would start looking hard at America's balance sheet and say, "How is it possible that they are going to pay the principal and interest on all those trillions of IOU's....and continue to pay the unfunded promises of Social Security, Medicare and Welfare?"

Today we find a headline that a Chinese credit rating firm has downgraded the U.S.

Chinese Credit Rater Downgrades U.S.

Dagong Global Credit Rating Co., the Chinese rating company that was recently rejected in its bid to be an officially recognized bond rater in the U.S., just downgraded the entire U.S.

“The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency,” Dagong said in a report.

The Chinese rating agency said the Federal Reserve’s new round of quantitative easing would further depreciate the U.S. dollar and was entirely counter to the interest of the creditors.

The Federal Reserve last week decided to buy 600 billion U.S. dollars of U.S. Treasury securities and other assets held by banks in a bid to inject fresh funds into the economy and bring down long-term interest rates.

“The credit crisis is far from over in the United States and the U.S. economy will be in a long-term recession,” Dagong Global warned in the report, adding a weakening greenback will cripple U.S. capability to attract dollar capital reflow.

See it here; http://blogs.wsj.com/marketbeat/2010/11/09/chinese-credit-rater-downgrades-us/

Now please note that the Journal writer does go on to say that Dagong Global has not been widely recognized as the major global credit rating company....meaning that, at present, it's not the same seriousness as it would be if Standard and Poors or Moody's came forward and said the same thing.

However, please remember that Standard and Poors and Moody's failed to warn anybody of all the toxic junk bonds that almost collapsed the financial markets in 2008....so not sure they deserve anymore credence than Dagon Global.