A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
"In our opinion, the United States has already been defaulting," Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.
Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies -- eroding the wealth of creditors including China, Guan said.
10 comments:
**yawn**
Welcome to capitalism.
Tom,
This isn't capitalism at least not free market capitalism. It's become a loaded word that has no meaning. Every economic system employs capital. In that sense one could call all economies capitalistic. The pertinent question is who gets to direct the capital: individuals or central planners?
It isn't even that simple because through govt. mandates, perverse tax incentives, public-private partnerships, state sanctioned cartels, regulations that creation barriers to entry, subsidies, etc. the government ACTS as if it directs capital.
TomatoBasil,
Some of us have been warning about reports like these for some time. You can **yawn** all you want. I think it's a nervous yawn. We'll see if your so cavalier in a year's time.
Oops! The last sentence should read "you're" and not "your."
Huh? Last time I checked capital was allocated by the financial sector, like always. While capital has captured the apparatus of the state, and uses the power of the state for its benefit, this is nothing new. State capture began in the US with Alexander Hamilton and Robert Morris and has had its ups and down, but capital has mostly been up.
As long as Big Money controls the political process, it will ever be so, and the US will be a democracy in name only. It will be interesting to see whether the Tea Party can win control of the presidency and both houses, and then overthrow the plutocratic oligarchy. Count me skeptical. Especially when folks like the Kochs are providing the money.
Anonymous: More than likely this "downgrade" is a reaction to the circling vultures around China. The chorus of people like Chanos, Hitchens, and the SEC Investigations into Chinese reverse mergers required a political punch back. I agree with the Chinese Govt, the US Government is grossly mismanaged: It is over taxing or underspending. If the Chinese don't want treasuries, they can spend all the dollars they earn selling IPADS and Walmart clutter instead. We have 9.1% of the nation standing by idle, literally dying to work and wanting to save more of their paychecks in financial instruments currently held by the Chinese.
Utter, pernicious nonsense from Guan Jianzhong. Perhaps Western quackonomics is starting to close the Chinese mind. Though TomatoBasil is probably right - just political payback in kind for the mountain of BS USians say & do about China.
Exchange rate movements, foreign savings of US dollars, are not up to US control, and are not a responsibility of the USA. This complaint is as ridiculous as someone who bought a lottery ticket complaining that the lottery defaulted when he didn't win. If he wants a higher exchange rate, the reply is the same - buy more dollars.
As Lerner noted, what can be considered the US's international responsibility is to control domestic inflation - which it has done OK, better than China - and to spend enough to maintain demand, as TomatoBasil notes too, to not allow the contagion of depression to spread - which it had a perhaps passable record on compared to Europe say, but much worse than China especially since the crisis.
Anonymous: ...one could call all economies capitalistic. The pertinent question is who gets to direct the capital: individuals or central planners? Following Schumpeter, Keynes & others, one shouldn't call all economies capitalistic. The essence is modern banking - the public-private partnership of the state and the banking sector leveraging the state's money. Individuals using the state's money vs. central planner of the state issuing it was the old premodern paradigm. Governments if the exist at all MUST direct their money, their financial capital. The modern paradigm inserts the bank loan officer between the two, hopefully flexibly allowing for the monetization of private debts for productive enterprise.
"The pertinent question is who gets to direct the capital: individuals or central planners?... Some of us have been warning about reports like these for some time."
Hmm, let me see if I follow your logic... the running dog capitalists in the People's Republic of China should be allowed to take away the economy's commanding heights from our central planner/hero-fathers here in the United States of America?
Tom,
I have read the same books as the Kochs. They aren't political capitalists. They are market capitalists. They are adherents of Austrian economists. I think it way too simplistic to assume that they are political capitalists simply because they are rich. From what I have seen they are among the few that won't to challenge the progressive-corporatist state.
Tea party has been captured by the R establishment for the most part.
The private sector is directing most of the capital, but they are being led around by the nose. Govt. tries to control where the scarce savings will go. As I said in the earlier post, all of the corporatism, i.e. public-private partnerships, perverse incentives in the tax code,mandates, subsidies, state-sanctioned cartels, etc., all cause capital to be directed in placed where it wouldn't have necessarily gone absent these measures. I think it is important to grasp that corporatism is the state picking winners and losers--central planning in other words. It's too often confused with a free market.
Also, it's not just large firms feeding at the trough. It's unions, age lobbies, race lobbies, and many, many more factions.
So long as we have an unlimited democracy this will be the case. If the govt. creates acome-by-me system then don't be surprised when interest factions form in order to solicit for special laws, subsidies, etc.
Our founders didn't create a democracy. They created a republic. Read through the founding documents--the word democracy is never used. Interest factions will control the apparatus of govt. so long as an unlimited democracy exists. The structure has to cahnge. Political parties and personalities of the moment won't be able to do anything, no matter how well intended, so long as the current structure is is place. We don't follow out Constitution.
Basically agree with that analysis, Anonymous. This goes back to the Founding Fathers, when Alexander Hamilton basically ran away with the show with his interpretation of the Constitution. William Hogeland documents here and here.
I don't see it the solution as as a matter of "getting back to the Constitution." The Constitution, as Hogeland documents, was designed to give political control to the elite. The interpretation question was over how much control to different elite factions, and Hamilton was more successful than others.
Early democratic/populist movements were crushed, sometime ruthlessly (the Whisky Rebellion). America's developmental process was a lot messier than most people realize, and it came to a head in the Civil War.
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