Dagong cuts US sovereign rating one level to A, on par with Russia and South Africa
Patrick Chovanec talked to Bloomberg earlier today about the Chinese rating agency Dagong’s downgrade of US sovereign debt to Single-A. Chovanec says that Dagong is ‘hyper-sensitive’ to US risk and their downgrades to the US have resulted in a rating lower than some local Chinese government ratings where the local governments have serious liquidity issues.
Clearly this is very political as Chovanec mentions Dagong comments about the bankruptcy of American culture and the dysfunction of American political governance. Chovanec is right that the question is two-fold. A, how accurate will Dagong’s prognostications prove to be with the benefit of hindsight? And B, will Dagong have an influence on Chinese government currency and economic policy?
Good interview. Video below
Well then, why do Chinese want dollars? They trade goods and services to the US for dollars then do not buy as many goods and services from the US. If they think it is a riskier asset now, why do they keep doing that – who is the fool, if they really think that. They are not that stupid, so there is evidently some other agenda in this – any idea what it is??