A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.
Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies — eroding the wealth of creditors including China, Guan said.
Guan did not immediately respond to AFP requests for comment.
The US government will run out of room to spend more on August 2 unless Congress bumps up the borrowing limit beyond $14.29 trillion — but Republicans are refusing to support such a move until a deficit cutting deal is reached.
Ratings agency Fitch on Wednesday joined Moody’s and Standard & Poor’s to warn the United States could lose its first-class credit rating if it fails to raise its debt ceiling to avoid defaulting on loans.
A downgrade could sharply raise US borrowing costs, worsening the country’s already dire fiscal position, and send shock waves through the financial world, which has long considered US debt a benchmark among safe-haven investments.
China is by far the top holder of US debt and has in the past raised worries that the massive US stimulus effort launched to revive the economy would lead to mushrooming debt that erodes the value of the dollar and its Treasury holdings.
Beijing cut its holdings of US Treasury securities for the fifth month in a row to $1.145 trillion in March, down $9.2 billion from February and 2.6 percent less than October’s peak of $1.175 trillion, US data showed last month.
Foreign ministry spokesman Hong Lei on Thursday urged the United States to adopt “effective measures to improve its fiscal situation”.
Dagong has made a name for itself by hitting out at its three Western rivals, saying they caused the financial crisis by failing to properly disclose risk.
The Chinese agency, which is trying to build an international profile, has given the United States and several other nations lower marks than they received from the the big three.
(Source: AFP)
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13 Responses
This is a time bomb…the teaparty-type ideologues know not what they are doing when they play partisan games with debt ceilings…generations of bipartisan Congressional leaders knew enough not to play with this…but not now.
Hallaluka…the GOP has now found religion…after leading us into the largest deficit in history they want to tie increasing the debt ceiling to acceptance of their particular deficit reduction policies, throwing partisan policy issues into places they don’t belong. Just imagine if Pelosi and the lefties tied absolutely essential military spending to their pet policies…would be just as irresponsible.
And my comment about the largest deficit in history is fact, not opinion…In January 2001 when George Dubya took office we had a substantial surplus…then came the 2001 tax cuts with no offsets, and a decade of off-budget military operations. Where were all of you deficit hawks then, huh?
YonasonW,
Although I agree with you on most things, I don’t agree with you when you lie.
The Conservative wing of the Republican party were protesting throughout the Bush years against the budget deficits, which is why the Republicans lost the House in 2006, because the Conservatives refused to reelect the Republicans.
The Tea Party evolved because the Conservatives realized that the Republican party was very similar to the Democratic party, and that both parties were not going to stop the budget deficits. In fact, the Republican leadership today would love to keep the deficits going, and it is only the threats of the Tea Party that causes the Republican leadership to fight President Obama every step of the eay.
I believe that my liberal colleagues make a huge mistake in dismissing the Tea Party. These are the real conservatives, and we must fight them to the bitter end. They are trying to stop the budget deficits. If the Tea Party succeeds in stopping the budget deficits, we won’t be able to implement the changes that we worked so hard for when we campaigned for President Obama.
Ummm, what are you talking about? Obama has spent about 3 TRILLION DOLLARS since being in office. How can you even begin to fault Bush? I’m not disagreeing with the fact that there was a deficit when he left, but come on it is not even close. Does the fact that the ‘black messiah’ has spent more than the last 10 presidents combined have any bearing on our current situation? Obviously not according to you. Funny how any bush success can only be attributed to Clinton but every Obama failure (I have yet to see successes) is Bush’s fault.
to #1
and Obama has done NOTHING to increase it!!!!!!
re-elect Obama and see what he then does to this once great
country
1 You really don’t know too much so please do us all a favor and stick your head back in the sand. The govt takes in money in taxes and has the money to pay the interest if they wanted to. Like for example, STOP WASTEFUL SPENDING!!!!!!!!! But as a socialist liberal democrat who hasn’t met anyone else’s money you wouldn’t like to spend, you don’t know what it means to cut spending.
Socialists sicken me and should sicken everyone.
i fantasize of china somehow just walking in and taking over (on simplistic ethnic grounds). but judging by tibet it would probably end up about the same, maybe just a little less evil..
You fellows should stop the data-less polemics and simply look up deficit numbers on official government websites – look at absolute and percentage growth each year 2000 until 2010.
And as for ProudLiberal, who calls me a liar, and Herr Levin, who calls me a socialist liberal democrat…name-calling is a rather immature, mindless and ad hominem substitute for substance.
lOOK what is happening now. Deficit is out of control; mainly and repeat mainly not entirely caused by Democratic
spending plans, with no end in sight. Meidicaid is a necessity but must be cut and especially with the younger generation. Social Security was set for 65 when the life span for a man was 56; today is must be raise to 70 [not for the people on social security already but for people under 60. Women who live longer should at least be equal to men not retire 3 to 5 years earlier. obama wants to spend more like the last stimulus which we are further in debt and more unemployment. The government is printing money to buy its own bonds back. China is no fool and wants it’s assets protected;CUT THE DEFICIT
From Wikipedia…note the FY ’08 information. Notte also, thoughnot said explicitly here, a large piecre of the pre-’08 off budget military spending is now on-budget
“The annual budget deficit is the difference between actual cash collections and budgeted spending (a partial measure of total spending) during a given fiscal year, which runs from October 1 to September 30. Since 1970, the U.S. Federal Government has run deficits for all but four years (1998–2001)[54] contributing to a total debt of $14.0 trillion as of December 2010.[55]
“The U.S. Federal Government collected $2.52 trillion in FY2008, while budgeted spending was $2.98 trillion, generating a total deficit of $455 billion. However, during FY2008 the national debt increased by $1,017 billion, much more than the $455 billion deficit figure. This means actual expenditure was closer to $3.5 trillion (the $2.52 trillion in collections, all of which was spent, plus $1.0 trillion debt increase). The national debt represents the outstanding obligations of the government at any given time, comprising both public and intra-governmental debt. Differences between the annual deficit and annual change in the national debt include the treatment of the surplus Social Security payroll tax revenues (which increase the debt but not the deficit), supplemental appropriations for the Iraq and Afghanistan wars, and earmarks.
“These differences can make it more challenging to determine how much the government actually spends relative to tax revenues. The increase in the national debt during a given year is a helpful measure to determine this amount. From FY 2003-2007, the national debt increased approximately $550 billion per year on average. For the first time in FY 2008, the U.S. added $1 trillion to the national debt.[56] In relative terms, from 2003-2007 the government spent roughly $1.20 for each $1.00 it collected in taxes. This increased to $1.40 in FY2008 and $1.90 in FY2009.
“Social Security payroll taxes and benefit payments, along with the net balance of the U.S. Postal Service are considered “off-budget.” Administrative costs of the Social Security Administration (SSA), however, are classified as “on-budget.” In large part because of Social Security surpluses, the total federal budget deficit is smaller than the on-budget deficit. The surplus of Social Security payroll taxes over benefit payments is invested in special Treasury securities held by the Social Security Trust Fund. Social Security and other federal trust funds are part of the “intergovernmental debt.” The total federal debt is divided into “intergovernmental debt” and “debt held by the public.”
“The Conservative wing of the Republican party were protesting throughout the Bush years against the budget deficits”
Oh, come on! The Conservative Wing of the Republican Party all supported the Not-Paid-For Iraq invasion with the exception of a few isolationists like Ron Paul. And most of them supported his Not-Paid-For Medicare Prescription Plan that was really Corporate Welfare for the pharmaceutical industry.
The Chinese government manipulated the value of the Renminbi for decades in order to encourage Chinese exports. It has no right to complain.
The most obvious solution to this is to exchange land for (financial) peace. Let America pay off its debt to China by giving them California. If that might upset a few people, then maybe just lease it to them for 50 or 100 years at a dollar a year as payment.
Aryeh Zelasko
Beit Shemesh
No. 7: Data-less polemics is at the core of Republican party ideology, along with shameless support for the special interests of the moneyed class. I wonder whether Nos. 3, 4 and 5 are members of the moneyed class trying to dupe the YWN readership, or victims of the cynical Republican ideology, which covers for their real support of the moneyed class.
And one technical correction: No. 5’s name-calling is not “rather” immature, it is “thoroughly” immature.