America's AAA Rating Is Cut in Land of Bubbles: William Pesek - Bloomberg America's AAA Rating Is Cut in Land of Bubbles: William Pesek
By William Pesek - Jul 19, 2010
Bloomberg Opinion
Pesek
William Pesek
Moody?s Investors Service, Standard & Poor?s and Fitch Ratings can?t be happy.
Last week, the world?s credit-rating giants got scooped on the biggest rating decision: whether to strip the U.S. of AAA status. Worse, the U.S. was downgraded by a company that few people have ever heard of, and a Chinese one at that.
While Moody?s and S&P ignore the wreckage that America?s finances have become, Beijing-based Dagong Global Credit Rating Co. is uncorrupted by the system that enables developed-world debt addicts to appear fiscally clean. It rates U.S. debt AA, two levels below the top grade.
Dagong is right to turn the world of A- and Baa1 on its head even though rating China higher than the U.S. is hubristic at best. Anyone who thinks China deserves a top rating or is devoid of debt landmines isn?t looking very hard.
In its first foray into sovereign problems, Dagong raises some vital questions. One is whether ideology in favor of the West has more to do with ratings than the ability of governments to repay debt.
An alien arriving from outer space might take one look at America?s balance sheet, conclude it?s an emerging nation and buy Indonesian debt instead. The same goes for Japan and its demographic time bomb. France, Germany and the U.K. possess challenges that might necessitate lower ratings if true objectivity were to enter into the mix.
By William Pesek - Jul 19, 2010
Bloomberg Opinion
Pesek
William Pesek
Moody?s Investors Service, Standard & Poor?s and Fitch Ratings can?t be happy.
Last week, the world?s credit-rating giants got scooped on the biggest rating decision: whether to strip the U.S. of AAA status. Worse, the U.S. was downgraded by a company that few people have ever heard of, and a Chinese one at that.
While Moody?s and S&P ignore the wreckage that America?s finances have become, Beijing-based Dagong Global Credit Rating Co. is uncorrupted by the system that enables developed-world debt addicts to appear fiscally clean. It rates U.S. debt AA, two levels below the top grade.
Dagong is right to turn the world of A- and Baa1 on its head even though rating China higher than the U.S. is hubristic at best. Anyone who thinks China deserves a top rating or is devoid of debt landmines isn?t looking very hard.
In its first foray into sovereign problems, Dagong raises some vital questions. One is whether ideology in favor of the West has more to do with ratings than the ability of governments to repay debt.
An alien arriving from outer space might take one look at America?s balance sheet, conclude it?s an emerging nation and buy Indonesian debt instead. The same goes for Japan and its demographic time bomb. France, Germany and the U.K. possess challenges that might necessitate lower ratings if true objectivity were to enter into the mix.
