MUST READ: CHINA’S DAGONG CREDIT DOWNGRADES THE U.S. SOVEREIGN CREDIT RATINGS – “THE GOV’T IS STILL APPROACHING THE VERGE OF DEFAULT CRISIS”
OCTOBER 23, 2013
On October 16, 2013 EST, the U.S. Congress approve(d) the resolution to end the partial government shutdown and raise the debt ceiling. By such means the U.S. Federal Government can avoid the default crisis for the moment. However the fundamental situation that the debt growth rate significantly outpaces that of fiscal income and GDP remains unchanged. For a long time the U.S. government maintains its solvency by repaying its old debts through raising new debts, which constantly aggravates the vulnerability of the federal government’s solvency. Hence the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future. In light of these facts, Dagong Global Credit Rating Co., Ltd. (hereinafter referred to as “Dagong”) decides to downgrade the local and foreign currency credit ratings of the U. S., which has already been on the negative watch list, to A- from A, maintaining a negative outlook. The rationale that supports the conclusion is as follows:
1. The partial U.S. federal government shutdown apparently highlights the deterioration of the government’s solvency, pushing the sovereign debts into a crisis status. The U.S. federal government announced its shutdown on Oct. 1, 2013, a radical event that reflects the liquidity shortage aroused by depleting stock of debts without the increase of new debts, directly resulting in the federal government lack of the funds for its normal function. The partial U.S. government shutdown is an inevitable outcome of its long-term failure to pay its excessive debts.