The announcement by the international rating agency Standard & Poor's to downgrade the US sovereignty credit rating from AAA to AA+ has caused the highest AAA sovereign credit rating that the United States has maintained for close to a century to be rewritten for the first time. The action taken by the Standard &Poor's has not only added to the difficulty for economic recovery in the United States, but also that the impact of it will trigger a wide range of complex effects on world economy and financial market.
However, the reason for the Standard & Poor's to downgrade the US sovereign credit rating is exactly the same as China's Grand China International Credit Rating Company. This shows that not only China's credit rating company cannot stand the US style of politics; for even now; the long standing US credit rating company such as the Standard & Poor's has also lost confidence in the US political system.
Foreign Bond Investment Standard
After the US Congress passed the debt limit increase bill, the Grand China International Credit Rating Company became the first rating company in China to announce that it would downgrade the US foreign currency sovereign credit rating from ‘A +’ to ‘A’; with the outlook rated as ‘Negative’. The reason it gave was that the political party dispute in the United States has exposed the shortcomings of the US political system; it has become difficult for the US Government to govern the fundamental sovereign debt crisis. It said that as a result, the security and benefit of US debt creditors lack the needed protection from the US political and economic mechanism.
However, since the Grand China International Credit Rating Company does not belong to the authoritative group of the international credit rating agencies; and since this Chinese company has the tradition to rate other countries' sovereignty credit rating from a political approach, the Chinese authority has not used the credit rating of Grand China International Credit Rating Company as a criteria to make decision for its foreign bond investment standard.
Drop in US Stock Market
However, this time the reason given by the Standard & Poor to downgrade the US sovereign credit rating is actually consistent with the Grand China International Credit Rating Company's rationale. In Standard & Poor's public statement, it said that that although Standard &Poor's has acknowledged the US debt ceiling limit bill passed by the US Congress, but the Standard &Poor's was ‘pessimistic’ of the ability of the US Government and US Congress to resolve the US financial problems. Standard &Poor's has severely criticized the paralyzed US political system. It believed that the US Government and the US Congress are unable to implement the bill that has just been passed with the goal to implement long-term stability of the pending debt issue in the United States.
In other words, the US Democratic and Republican politicians have played with fire by raising the US federal debt limit issue. Yet between the two political parties, there indeed has no winner. At this moment, what is being questioned is the ability of US President Barack Obama to rule the nation and the credibility of the US political system itself. When the US stocks plummeted on Thursday [ 4 August], the sharp fall in the US stock market price has also pointed to the allegation that global investors have lost confidence in the performance of the US Government. The sharp drop in US stock market has also reflected the reality that the share market has already given Washington a vote of no confidence.
US Treasury Bond Issue
What followed was that the Chinese Foreign Minister Yang Jiechi and the Japanese Finance Minister Yoshihiko Noda have, on separate occasion, called for global cooperation in response to the US debt crisis. The reactions coming from China and Japan have reflected the reality that as the respective first and second largest creditor countries of the United States, China and Japan are indeed quite concern about the future of US debt issue.
Now, with the Standard & Poor's confirmation of the downgrading of the US sovereignty credit rating, such development will force China and Japan to take non-rival approach and action to handle the US Treasury bond issue.
However, the reason for the Standard & Poor's to downgrade the US sovereign credit rating is exactly the same as China's Grand China International Credit Rating Company. This shows that not only China's credit rating company cannot stand the US style of politics; for even now; the long standing US credit rating company such as the Standard & Poor's has also lost confidence in the US political system.
Foreign Bond Investment Standard
After the US Congress passed the debt limit increase bill, the Grand China International Credit Rating Company became the first rating company in China to announce that it would downgrade the US foreign currency sovereign credit rating from ‘A +’ to ‘A’; with the outlook rated as ‘Negative’. The reason it gave was that the political party dispute in the United States has exposed the shortcomings of the US political system; it has become difficult for the US Government to govern the fundamental sovereign debt crisis. It said that as a result, the security and benefit of US debt creditors lack the needed protection from the US political and economic mechanism.
However, since the Grand China International Credit Rating Company does not belong to the authoritative group of the international credit rating agencies; and since this Chinese company has the tradition to rate other countries' sovereignty credit rating from a political approach, the Chinese authority has not used the credit rating of Grand China International Credit Rating Company as a criteria to make decision for its foreign bond investment standard.
Drop in US Stock Market
However, this time the reason given by the Standard & Poor to downgrade the US sovereign credit rating is actually consistent with the Grand China International Credit Rating Company's rationale. In Standard & Poor's public statement, it said that that although Standard &Poor's has acknowledged the US debt ceiling limit bill passed by the US Congress, but the Standard &Poor's was ‘pessimistic’ of the ability of the US Government and US Congress to resolve the US financial problems. Standard &Poor's has severely criticized the paralyzed US political system. It believed that the US Government and the US Congress are unable to implement the bill that has just been passed with the goal to implement long-term stability of the pending debt issue in the United States.
In other words, the US Democratic and Republican politicians have played with fire by raising the US federal debt limit issue. Yet between the two political parties, there indeed has no winner. At this moment, what is being questioned is the ability of US President Barack Obama to rule the nation and the credibility of the US political system itself. When the US stocks plummeted on Thursday [ 4 August], the sharp fall in the US stock market price has also pointed to the allegation that global investors have lost confidence in the performance of the US Government. The sharp drop in US stock market has also reflected the reality that the share market has already given Washington a vote of no confidence.
US Treasury Bond Issue
What followed was that the Chinese Foreign Minister Yang Jiechi and the Japanese Finance Minister Yoshihiko Noda have, on separate occasion, called for global cooperation in response to the US debt crisis. The reactions coming from China and Japan have reflected the reality that as the respective first and second largest creditor countries of the United States, China and Japan are indeed quite concern about the future of US debt issue.
Now, with the Standard & Poor's confirmation of the downgrading of the US sovereignty credit rating, such development will force China and Japan to take non-rival approach and action to handle the US Treasury bond issue.
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