US Debt Rating - Moody Blues or Standard and Poorer

Moody’s Blues
or Standard and Poorer

Dennis Paulson

Don’t look now, but US debt rating agencies just became irrelevant. Sure, the Democrats’ 98% capitulation to the Republican plan to raise the debt ceiling saved us our triple-A rating with Moody’s, but now Moody’s itself has been downgraded.

The Dagong Global [emphasis on the word ‘global’] Credit Rating Company, China’s premiere credit rating agency, having lowered the US credit from A++ to A+ at the end of last fall, has quietly lowered the US credit rating to A in direct response to the no-nonsense action by the US to preserve war funding at the cost of entitlements. You would think that the Chinese are Kucinich peaceniks or something.

“The two (US) parties acted in a very irresponsible way, and their actions greatly exposed the negative impact of the US political system on economic fundamentals,” said Dagong Chairman Guan Jianzhong.

“The squabbling between the two political parties on raising the U.S. debt ceiling reflected an irreversible [make note of the word ‘irreversible’] trend on the United States ability to repay its debts.”

According to the DGCRC, all would have been hunky-dory if the cuts in spending had focused on our continued funding of five (or is it six with Yemen?) wars. Surely our debt could have been wiped out in a pen stroke had Obama lived up to his oft parroted 2007 campaign slogan to end the wars. The only question remaining for Obama seems to be how to whittle away at Medicare and Social Security without anyone noticing. Ah well, where there’s a will there’s always a way.

Does the US Debt rating have to be so confusing?

None of the wrangling over the debt ceiling put the markets at ease as it turns out. The August 2 drop of well over 200 points on the Dow coupled with the continued slide the following day are a signal that no one’s been fooled by this ‘grand bipartisan moment’, especially the Chinese.

For the time being, until the Yuan takes hold as the new petro-dollar, China will continue to buy U.S. junk bonds, but the US markets are getting noticeably more fidgety as that eventuality draws ever nearer.

Happy days will likely never be here again. There are undercurrents of rumblings throughout Europe as the Dagong gets a real footing as a power broker. That the U.S. Securities and Exchange Commission once flatly refused to recognize Dagong’s sovereign ratings of 67 countries, shows only that in the game of ‘follow the money’, the SEC recognizes the potential of this new competitor.

One day, Dagong or some other truly global agency will snub the SEC in similar fashion, and our grand PNAC project in the Middle East will have been for naught. In the final analysis, after the Chinese control all sales of petroleum products, we’ll be wondering perhaps if the lives of 5,000 of our young American men and women might have been better spent getting an education rather than participating in our Blood For Oil program.