After setting out the parameters of the next economic crash yesterday, China have stepped up and launched the first strike in the looming trade war with America…
China’s Dagong lowers US sovereign ratings to Peru level following tax cuts
BEIJING/HONG KONG, Jan 16 (Reuters) – China’s Dagong Global Credit Rating Co, one of the country’s major ratings firms, cut the sovereign ratings of the United States to BBB+ from A-, saying the tax reductions announced last month weakened Washington’s ability to repay debt.
The ratings, which are now level with those of Peru, Colombia and Turkmenistan on the Beijing-based agency’s scale of creditworthiness, have also been put on a negative outlook.
In a statement on Tuesday, Dagong warned that the United States’ increasing reliance on debt to drive development would erode its solvency. It made specific reference to President Donald Trump’s tax package, which is estimated to add $1.4 trillion over a decade to the $20 trillion national debt burden.
“Deficiencies in the current U.S. political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,” Dagong said.
“Massive tax cuts directly reduce the federal government’s sources of debt repayment, therefore further weaken the base of government’s debt repayment.”
The U.S. embassy in Beijing could not immediately comment.
…this is in response to the US blocking Chinese business interests…
Officials in Beijing are seething after the US blocked Ant Financial’s purchase of MoneyGram, and pressured AT&T into abandoning a deal to sell Huawei’s Mate 10 smartphone in the US over espionage concerns.
…and sets the stage for two inquiries by the US Commerce Department about to be presented to Trump tomorrow that could start a US trade war with China…
Twin inquiries by the US Commerce Department could open the way for punitive measures against Chinese steel and aluminium shipments on national security grounds, while a highly-sensitive probe into intellectual property theft and cyber-espionage will deliver its findings on Thursday (US time).
…by threatening a downgrade of US credit, China have openly threatened America to do anything with their inquiries into Chinese aluminium dumping and cyber-spying.
Against a reasoned opponent such threats would be enough to ensure economic self-preserverance, against Trump it could just provoke him into going well beyond any WTO mechanisms for trade disputes and unilaterally respond against China.
This at a time when the US markets are going beyond euphoric into kool aid territory and the real economy in China has slumped to 5% growth.
An over confident America and a China desperate to project external enemies for national solidarity and order are the ingredients for the Sino-US Pacific cold war to go hot.
In essence, US corporations exploit free trade and a market-led, government hands-off approach to use China’s massive production capabilities, their cheap labour, their lapse environmental regulations and less than ideal labour laws to maximise return to shareholders. So how will they be feeling right now?
Will this see production moved to even more exploitable countries but at a risk to capability and quality? I can’t see it ending up in the US as an alternative!
Which country has turned its financial system into a casino? Has the U.S. in the past hesitated to downgrade the credit rating of countries that are financially unstable? Is China making threatening military moves on the border of the U.S., or is it the other way around? [ Just as the U.S. Empire is doing exactly the same thing on Russia’s borders]. Answer these questions, hopefully not using U.S. Empire MSM sources, and you will see clearly from where the problem originates!!
100% Pete. China has a Centrally planned Government, that would not be the way to go in NZ, but the USA has a hidden centrally planned corporate government that is hidden and duplicitous and hence much worse. It usually ensures a malleable puppet is elected ( Hence Trumps demonisation) and then goes on to artificially inflate the stock market, not prosecute bankers who commit obvious fraud (Eric Holders “To big to fail “institutions) ,ramp up aggressive military attempts to continue to dominate the world economy and sanction countries that threaten their reserve currency dominance, artificially valuable but actually backed by so much debt it is complete s–t. All the while it keeps the sheeple preoccupied with sex scandals and identity politics so no one knows whether they are Arthur or Martha.
At least the Chinese, who have bought millions out of poverty have a plan to create economic growth for themselves and others with their One Belt One Road initiative
The “Euphoric” stock market in the US is totally artificial because of central bank buying of stocks. Most western countries would dream of 5% growth and to say China has “only 5% growth is peculiar. It is also peculiar to say China is looking to project external enemies to help national solidarity. China does need to keep its millions employed and hopeful to minimise unrest but with the USA manufacturing a crisis in North Korea and ringing China and Russia with military bases China has no need to “project” enemies.
I recommend listening to Harley Schlanger on subjects such as this as the MSM is a complete waste of time.
https://www.youtube.com/watch?v=AnX5_x7e54w
But NZ has had a behind the scenes “govt” for many decades.
You may not see it if you rely on MSM but only a fool could not see its imprint.
Who owns NZ. Its not Kiwis. That is not an accident.
Petro-Yuan is coming.
Anyone in No Zealand backing the Chinese dictatorship is either a deluded moron or an outright traitor.
Or thinking differently about where we stand and our resilience which has steadily stripped from us.
I’m on China’s side which is an indication (admittedly insignificant) for how low American stock has fallen under Trump. Trump has been a public relations disaster for the United States from which it may never fully recover
“Trump has been a public relations disaster for the United States from which it may never fully recover.
Is that such a bad thing? In many ways the USA are the problem, not the solution.
It could go lower than Clinton-Obama foreign policy? He might be tripping over his verbal dick, but at least world leaders aren’t getting sodomised to death with combat knives by jihadists like we had from those two nitwits and their idiotic invasion of Libya.
It’s funny, because when you consider the on-the-ground outcome of their hare brained regime change plot, you can technically argue that 110 years after Jefferson sent the US marines into Tripoli and ended a thousand years of slavery, Clinton and Obama sent them into Benghazi and brought it back!
100% Pete. China has a Centrally planned Government, that would not be the way to go in NZ, but the USA has a hidden centrally planned corporate government that is hidden and duplicitous and hence much worse. It usually ensures a malleable puppet is elected ( Hence Trumps demonisation) and then goes on to artificially inflate the stock market, not prosecute bankers who commit obvious fraud (Eric Holders “To big to fail “institutions) ,ramp up aggressive military attempts to continue to dominate the world economy and sanction countries that threaten their reserve currency dominance, artificially valuable but actually backed by so much debt it is complete s–t. All the while it keeps the sheeple preoccupied with sex scandals and identity politics so no one knows whether they are Arthur or Martha.
At least the Chinese, who have bought millions out of poverty have a plan to create economic growth for themselves and others with their One Belt One Road initiative
The “Euphoric” stock market in the US is totally artificial because of central bank buying of stocks. Most western countries would dream of 5% growth and to say China has “only 5% growth is peculiar. It is also peculiar to say China is looking to project external enemies to help national solidarity. China does need to keep its millions employed and hopeful to minimise unrest but with the USA manufacturing a crisis in North Korea and ringing China and Russia with military bases China has no need to “project” enemies.
I recommend listening to Harley Schlanger on subjects such as this as the MSM is a complete waste of time.
https://www.youtube.com/watch?v=AnX5_x7e54w
This is not yet a trade war, such arguments happen all the time, some complaints go to the WTO and get resolved over the years, some linger and may take longer, or will never be resolved.
The US and China are so inter dependent, it will be impossible by either party, to take serious measures that may harm the other trading partner, as it will drag themselves down also.
The US does still hold the upper hand, it can with its US dollar and its debt and other instruments play the markets in a way that will do more harm to China than vice a versa.
I understand Trump has “suffered” several highly profitable bankruptcies . Perhaps he has a similar deal in mind for the US economy.
D J S
Precisely the criticisms levelled at our own National government for cutting taxes in 2009 and 2010.
Not only did those cuts “weaken the base of government’s debt repayment” – debt rose to a massive $60+ billion.
No doubt National will now be excoriating the new Labour-led coalition for not cutting back our massive debt. A debt the Nats built up as election bribes, and which now has to be paid back.
Yes true that is Frank,
Now we will see our own ratings now fall due to this ‘over reliance’ of tax breaks just for the rich and less financial increases for the 99%.
“You cant get blood out of a stone”
One startling thing we has omitted to consider here is that both of these giants US/China have both used fake money printing (QE) “Quantitative easing” to fund their buying of global assets and internal funding of programs, while NZ has just sold off all it’s own money producing assets instead and have now vastly reduced their own income streams now.
Silly we were, as we should have also used the “NZ Reserve bank act” to print our own funds to use to fund our social/infrastructure programs, instead of borrowing overseas money at high interest rates.
They already have, Cleangreen. In 2014, our credit rating plummeted, as I reported here:
https://fmacskasy.wordpress.com/2014/01/07/if-national-are-such-prudent-fiscal-managers/
So much for National; being “prudent fiscal managers”.
I used to think that debts had to be paid back. Then I realized that the money we use does not actually exist (it is purely confidence based) and certain institutions -especially governments- never pay back debts: they just keep increasing the debt level. And if you are a government you can issue bonds to pay the interest on previous borrowing.
Needless to say, the more money central government and local government borrow, the more the bankers like it: they collect more interest payments. (The same for individuals borrowing money.)
The really interesting aspect is where does the money come from to pay the interest when money is created out of thin air (as most of it is in western nations)? The answer is continuous devaluation of the money already in the system and issuance of yet more debt.
Poor people are told that price increases are due to ‘inflation’…..which is a lie, of course. Prices increase because money is constantly devalued.
Therein lies the solution to the interest and repayment debacle as far as governments are concerned because they can manipulate official interest rates to historically low levels to minimize interest payments whilst at the same time scamming everyone else by permitting much higher interest rated in the general market.
We recently ( a couple of years ago) saw central banks depress interest rates to well below 1% and in some countries NEGATIVE INTEREST RATES were offered by official institutions.
The key to that scam is that other institutions are told to buy government debt.
And let’s not forget that when share markets start to plunge, various ‘plunge protection teams’ use central bank money created out of thin air to bolster stock prices.
And finally, if things get really haywire, nation such as America (actually not really an nation at all) can call on the BoJ or the BoE ect. to buy debt.
There is the famous story of how the Roosevelt administration told the people to sell their gold to the government (I believe for $28 an ounce) and two weeks after the government had got most of the gold it revalued it (I believe to $35 an ounce).
It was Nixon, of course, who closed the ‘gold window’ (direct convertability of government debt into gold) when France got nervous about the US Vietnam-war-related deficits and the US government’s inability to pay back money owed. Since Nixon’s time the whole financial system has been a gigantic Ponzi scheme. But 99.999% of the populace is totally unaware of the true nature of money and thinks everything is just fine, despite houses built for a few thousand pounds (or in some cases a few hundred pounds) now selling for close to a million dollars.
This whole Ponzi system can continue to function only as long as there is economic growth (or there is the perception of economic growth).
In practice, since all commercial activity in industrialised nations is ultimately dependent on consumption of oil, it naturally follows that the whole global Ponzi scheme will collapse once there is significant decline in the global oil supply (or a decline in internationally tradable oil)…..which the point we have almost reached, despite numerous desperation measures (fracking, tar sands extraction, deepwater drilling etc.) to stave off that moment.
Thanks for that. I’ve always found it difficult getting my head around money stuff, but thats a great explanation, very helpul
As cynical as all that sounds that is exactly how it works. Central banksters/government/corporations keep devaluing currency in order to pay interest on debts, buy back shares, roll over debt etc. The cost is inflation on everyone else (it truly is a zero sum game, which is something a lot of people don’t realise), i.e. these 1% parasitic leeches create a “wealth effect” for themselves at the cost of the remaining 99%’s purchasing power (and any chance they might have had in increasing their net wealth). It really is a perfect scam, and one that is sustainable for as long as people don’t start to feel poorer and/or stop being productive – i.e. these “people”are effectively stealing any and all wealth increases from increased productivity that would and should have gone to you.
Nationals job has been to get us into debt among other things such as opening up NZ assets for the transnational investor state. (lying key’s and English’s fictitious mum and dad investors)
That was certainly the excuse Douglas (and later Richardson) used in the 1980s and 1990s, John. “Mum and Dad Investors” were investor companies; offshore superannuation funds; etc. Faye & Richwhite bought up NZ Rail and plundered it. The reason the Hungarian GANZ-MAVAG trains in Wellington were constantly breaking down? Faye & Richwhite ordered spare parts to be sold off as scrap metal – which created a “profit” that year, driving up share prices.
The Commerce Commission and Faye-Richwhite later settled an insider-trading case out-of-court.
I recall that case, Frank. Yes indeed, Faye Richwhite paid dearly for their rampant insider-trading over NZ Rail. It was a clear indicator where this country was heading with corporate cronyism and all the other excesses of rampant capitalism.
They should both have gone to jail, as Allan Hawkins of Equiticorp did in the 1980s.
God help us if the warmongers in the White House take on China!
And please dear lord, I hope our government is sane enough to keep distance between two giants thrashing in mortal struggle for supremacy. Small countries like ours would be crushed beneath their stomping jackboots!
@ Priss … Absolutely right there!
IMO I can’t see the Labour led coalition becoming involved in this battle somehow.
Priss calling on a mythical supernatural to change things just never works.
This has been coming for a long time and NZ has done nothing to avoid it. In fact NZ has aggravated it by assisting in the many wars we have poked out nose into, assisting Britain and the US empire building at the cost of many millions of lives and stripping of resources for profit by a wealthy few.
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