While China beats up America on its credit rating, they themselves have never been on par with America's credit rating. by James Luko
(centrist)
Sunday, August 7, 2011
Before we take a verbal beating from such deadbeats as China and Russia, perhaps they might explain why they themselves, for years, have had terrible credit ratings from S&P. Currently, China has AA- [1] still two levels below even the newly U.S. Downgraded rating (which is now AA+)*, (although Moody's and all other credit ratings have NOT downgraded U.S. Debt) and Russia has an almost “junk bond” rating of BBB [2].
Even S&P (Standard & Poor Credit Rating Agency) has scars to hide as it has constantly been involved in scandals where their ratings were perhaps “not” impartial or completely off the mark as with CDO's**.
Our Asian ally South Korea, has a rating of only “A” [3]. Many of our Western allies have lower ratings than ourselves. One might argue that as Russian Rubles and Chinese Yuan are not held as reserve currencies, their credit ratings are irrelevant, but that has no bearing on what they are arguing against the US, ie.. financial irresponsibility.
They, with poor ratings since they became nation states epitomize, vast, wide, deep corruption, lack of competition, massive currency manipulation, toxic polluters, slave wages in Chinese factories, thousands of industrial accident deaths, which are estimated to be many times more than officially reported. [4] Therefore, before they (China) have the audacity, being authoritarian police states, to throw stones at the United States, their money remains in the safest haven (even last week China continued to buy US treasury securities- albeit at a slower pace [5]) for accumulated wealth, the United States of America for they would not store their government's and private wealth in their own countries for fear of its unreliability. When China and Russia match or supersede American credit ratings, they can criticize, otherwise they are welcome to park their cash in worthless rubles and manipulated Yuan.
* Under the category of AA debt, there are three sub-levels: AA+, AA, AA- Standard & Poor now rates American debt at AA+ while China remains at AA-, two levels below the U.S.
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Posted By: Bill Gee
Date: August 8, 2011 11:22:18 AM
All true, but as "America's Banker", they do have every right to be concerned with how we are running our fiscal affairs.
I found it interesting that all weekend both the government and pundants all over the media have engaged in a game of "shoot the messenger" when it comes to both S&P and China. Granted, neither China nor S&P have good track records when it comes to fiscal responsibility, but that doesn't change the fact that they are calling it the way they see it, and they've got plenty of data to back it up. The "Emperor has no Clothes", he hasn't had any for many years. So what do we do with the child that states this fact to rest of the world? We tell him that he's wrong, and we announce to the world that he is only a naughty little child and doesn't know any better.
Posted By: AndyWilcoxson
Date: August 9, 2011 12:35:31 PM
Good article, but I wonder if S&P should be rating the US Government's bonds at all. They have a conflict of interest. If the SEC didn't certify them as a Nationally Recognized Statistical Rating Organization (NRSRO), they'd be out of business. Should S&P be making risk assesments about US Government securities, when they depend on US Government certification for the lifeblood of their entire business?
You're right that S&P gives the United States a better rating than China or Russia, but then again China and Russia aren't in a position to revoke S&P's certification. To the extent that there is any bias at S&P, that bias is definitely going to be in favor of the United States.
Posted By: Bill Gee
Date: August 10, 2011 11:19:07 AM
Andy - good point. Therefore, you can conclude that the risk assessment of the United States must be exceptionally bad for S&P to downgrade them at all! Given what we know, the current rating should probably be closer to the A+ or BB range.
