China agency 'downgrades' U.S. debt
Wednesday, July 21, 2010 | Teeka Tiwari
Wait a minute, what?
I know what you're thinking: "Is this a joke?" It's not a joke ...
Amid little fanfare, China's leading credit rating agency, Dagong Global Credit Rating Co., cut the USA's credit rating from AAA to AA. Truth be told, Dagong is a nobody in the global ratings game, which is dominated by the three member oligarchy made up of S&P, Moody's and Fitch.
Political Puppet or Genuine Analysis?
Could there be some tit for tat at play here between China and the US? After all, the US has been jawboning China relentlessly on the value on the Yuan. But a Chinese government led attack on America's credit rating really doesn't make much sense for the Chinese. If you owned $1 trillion worth of US debt, would you be in a hurry to knock down its value?
Is it more likely that Dagong is attempting to separate itself from its competitors by making the tough calls? Think about it logically -- how far fetched can a US credit rating cut be when we're scheduled to see our national debt eclipse our GDP within the next decade?
The New Masters of the Universe
As laughable as Dagong's analysis may appear to most Westerners, there is nothing laughable about how serious Dagong is about offering an alternative "non western" view when it comes to sovereign credit ratings.
They've already set up a dedicated school of credit management at the prestigious Tianjin University of Finance and Economics. The school (the first of its kind in China) is entirely devoted to the study of credit rating and risk management.
Knowing how to price risk appropriately is a HUGE trading edge. Not convinced? John Paulson's $15 billion pile of credit default swap winnings is a pretty compelling testament to the power of knowing how to appropriately price risk.
Think about this: Back in 2007, credit default insurance could be bought on Greek sovereign debt for about $5,000 per $10,000,000 in coverage. Today that same coverage will cost you $892,000.
Consider the implications of that for a moment.
How could such a GIGANTIC mis-pricing of risk be allowed to take place in a world full of Ivy League educated mega brains? It takes a special kind of smart to be that dumb, I guess.
The ugly truth of it is that the ratings agencies, specifically S&P and Moody's, are run by incompetent, mentally lazy and complacent management teams. This is what happens when you allow oligopolies to flourish. Why should they change? What incentive do they have to change?
No terrorist or foreign sovereign power did more to harm our interests than these bozos. Truth be told, both companies should be dismantled and their respective management teams should be given multiple life sentences.
Scary Stupid or Corrupt as Hell?
We really have to ask ourselves: Could the men and women who work for the ratings agencies be so smart and so excessively incompetent at the same time?
In my opinion, the truth is far uglier. I believe that it is more than plausible that these people knew that what they were rubber stamping as triple-A rated was in actual fact garbage. How could they not have known? At the end of the day it was all about getting their 30 pieces of silver, period, end of discussion.
These guys could not care less about you and I or the long term implications of their actions. This concept that is fobbed off on us that the people in charge are assumed to comport themselves with a higher sense of duty and honor is utter twaddle. For them, it's all about getting as much as they can as quickly as they can without getting caught.
This ruthless, naked greed, this whole, "get mine" at all costs mentality is a sickness rotting our country from the inside out. This whole idea of personal enrichment at any cost is not what my idea of capitalism is about.
We have got to let our voices be heard, and start supporting non conventional political candidates. We have to demand that these corporate and political parasites that got us in this mess are held to account. They are bleeding the good people of this country dry.
Bit by bit, drop by drop, the life blood of this great nation is slowly seeping away into a miasma that is being supped on and sucked up to feed the twin evils of crony capitalism and wild government spending.
We must act to save our children and children's children from succumbing to this moral taint that appears to have our corporate and political leaders within its grips. How long can any society that constantly steals from its populace really last?
I want to hear about your solutions -- are you seeing any political candidates that are worthy of our votes? How do We The People take our country back?
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