The president of an upstart Chinese ratings agency says the United States already has defaulted on its debt.
“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co., told the Global Times, a Chinese newspaper, as quoted by the Wall Street Journal.
The U.S. government continues to borrow money under the Congressionally imposed borrowing cap of $14.29 trillion. It can keep going until Aug. 2, when the Treasury will run out of short-term accounting tricks, as we recently reported.
Democrats are trying to raise the limit, while House Republicans hold out for concessions to reduce spending. But according to Guan, none of that matters. By allowing the value of the dollar to fall in relation to other currencies, eroding its values to major creditors like China, America’s actual debt is much higher than it officially appears, Guan argues.
[Related: U.S. Maxes Out Its Credit]
Meanwhile, Guan’s company has been trying over the last two years to capitalise on the failing of the big three American ratings companies: Moody’s, Standard & Poor’s and Fitch. It has criticised the three for failing to do adequate risk assessments that might have staved off the Great Recession of 2008, according to Agence France Presse.
Dagong Global Credit Rating recently downgraded the credit rating of the United Kingdom, giving the nation a “negative outlook for its solvency.” The company also has spent more than $1 million on a legal and lobbying effort to win approval by the Securities and Exchange Commission to enter the U.S. market. So far the SEC has turned it down, according to a report in Bloomberg, because the agency doubts that a company headquartered in Beijing with no offices in the U.S. could be overseen by American regulators.
Christopher Maag is Credit.com’s Staff Writer. Chris graduated with honours from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics.
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