Just when you thought the pain wouldn't come, the big red boot kicked in the door waiting a vintage 1953 Kalashnikov and telling you to get your lazy American ass in shape. Well, not exactly but [/embed] Dagong's threat to downgrade U.S. debt is an interesting signal. One that can certainly be interpreted differently by bears and bulls.
If the debt limit is raised and the public debt continues to grow, it will further damage the US debtpaying ability, which is a key factor in Dagong's evaluation, and we will consider loweringits ratings accordingly. If the raised limit fails to pass and the US faces default, the rating will be immediately andsubstantially downgraded
So, according to Guan Jianzhong, Chairman and CEO of Dagong. Mr. Dagong fails to recognize a crucial fact of life, however. China really has no. They must continue to buy U.S. debt. The threatened downgrade is really not much more than an attempt to get a discount on a purchase they already have to make.
As I have stated previously, the currency wars are the crucial financial event of our current era. That pretty much sucks for rational investors and people who like to analyze numbers inside and out, but it is pretty cool for those of us who like a good old fashioned Mexican Stand-Off.
America has already done a pretty good job of dragging Europe into the gutter as a result of currency competition and many have long been saying that China is the real target. Though I wouldn't agree with the policy if true, it certainly makes economic sense. China has been allowed to manipulate global economics with its Yuan stranglehold for far too long.
As the old saying goes, if you can't beat'em, join'em. With their youthful population advantage dwindling, public calls for greater wealth redistribution and the Arab Spring weighing heavily on Chinese officials' minds...this is certainly turn of events, indeed.
So what say you, folks? Am I the only here who is starting to see the (potential) brilliance of the U.S. currency strategy towards China? It does clash with my libertarian values, but I will be damned if it doesn't feel good to make the other guy squirm...