World heading for financial crisis worse than in 2008 — China’s Dagong rating agency head

Wow, truthiness from a credit ratings agency.  Too bad it came from a Chinese agency publishing their opinions on a Russia media outlet.

http://itar-tass.com/en/economy/775374

China’s Dagong May Cut U.S. Credit Rating Again If It Adopts QE3 Program

Another step toward banana republic status is in the cards. 

http://www.bloomberg.com/news/2011-11-12/china-s-dagong-may-cut-u-s-credit-rating-again-if-it-adopts-qe3-program.html

Dagong Says Will Cut US Rating As Early As Monday

In the latest game of finger-pointing, Chinese credit rating agency Dagong threatens to lower its rating on US debt next week.  My question is:  what took them so long?

http://www.zerohedge.com/news/dagong-says-will-cut-us-rating-early-monday

China ratings house says US defaulting

http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_678361.html

A CHINESE ratings house has accused the United States of defaulting on its massive debt, state media said on 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, Mr Guan said.

The worst advice I’ve seen in years

http://www.sovereignman.com/expat/the-worst-advice-ive-seen-in-years

Putting its money where its mouth is, Dagong has a long-standing, negative outlook on US debt that doesn’t pull any punches. From its November 2010 report:

“In essence the depreciation of the U.S. dollar adopted by the U.S. government indicates that its solvency is on the brink of collapse, therefore it wants to cut its debt through the act of devaluation with the national will; such a move has severely harmed the interests of creditors.”

Following suit, S&P stunned financial markets this morning by revising its US outlook to ‘negative’, citing politicians’ inability to address medium-term and long-term challenges.

In total contrast, US News and World Report published an article a few days ago entitled Why you should buy U.S. Treasuries,” which amounts to the worst advice I’ve seen in years. 

The article is devoid of any clear analysis which could support loaning our hard-earned savings to the most indebted nation in the history of the world in a rapidly depreciating currency at rates which have little chance of keeping up with inflation; instead, the author relies solely on patriotism:

“It has always been a bad idea to bet against America and our ability to prosper even against overwhelming difficulties. America will cut back its spending, innovate, and pay off its debts. We will earn our way out. It’s just how we do it…”

A more accurate statement would have been, “that’s how we used to do it…” Fact is, America’s economic problems are deep-seeded and neither political party can put forth a viable strategy for righting the ship. Even S&P is starting to realize this.

This is essentially the same strategy the Japanese government has executed on its own citizens for over two decades:  jam Japanese government bonds down their throats, and encourage them to accept 0% returns on their hard-earned savings in exchange for feelings of patriotism.