China ratings house says US defaulting: report
AFP – Fri, 10 Jun, 2011

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.

Saving this quote. I see 90 days being... June 11th.

This week, a bond ratings agency, Fitch, warned it could put U.S. debt on watch for a downgrade. The notice followed similar warnings from Moody's Investors Service and Standard & Poor's.

The thing is, at the rates Treasuries are currently selling for, it would be stupid for the government NOT to borrow money. The real yield is significantly negative, the government makes money right now when it borrows.

Sounds like a possibility, Han. Obama wanted a clean vote on the ceiling. It was given and failed miserably.

If we are in a "bad" fiscal situation, then which year was better? It is like saying my Internet is slow because it's not a gigabit connection.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201106101414dowjonesdjonline000493&title=us-budget-deficit-tops-57-billion-in-may-treasury



But, you know ...

No.

Do you know how much debt the USA has at this moment and who holds that debt? Do you know how much over budget the USA operates? These are economic realities that are ignored by the various people involved.

For example, nowadays much of our commerce is managed online, which is a ton more efficient than older methods. But I don't think this is figured into economic models.

How is it not figured into economic models? What does the efficiency provide? Either lower prices, or higher profit margins. Both of which are things every economic model I know of will at least pay attention to.

Newsflash: despite this efficiency (and the potential for it to lower prices), we're experiencing significant inflation; and despite this efficiency (and the potential for it to result in higher profit margins) neither wages and dividend-bearing investments are keeping up.

Newsflash: despite this efficiency (and the potential for it to lower prices), we're experiencing significant inflation; and despite this efficiency (and the potential for it to result in higher profit margins) neither wages and dividend-bearing investments are keeping up.

Not really. This "high inflation" argument I see everywhere (people claiming we've had double-digit inflation for at least ten years) just doesn't hold water. I mean, if inflation really has been 10% since 2000, then:

1. There was no housing bubble. (as real estate would have been losing value from 2000-2007)
2. The average American's (that is, the median) income is half what it was in 1990.
3. The average American's home is worth ~23% of what it was in 2001.
4. Gas and energy prices have actually been declining, despite increased demand.

Prices are based on the money supply. If there are lower prices then probably there are less dollars in circulation. For example, if the entire monetary supply was $1000, a donut would cost $0.00000000005 or so.

Okay, let's use the Big Mac index, as it's something I can readily find some information on, and is easy to process data for since it's a single item. Granted, it's a single item, so it's only one series of data points and thus only loosely representative of the economy as a whole, but it's what I've got that doesn't involve a bunch of basket manipulation (that is, essentially, at the heart of the argument in the first place).