China’s credit rating agency Dagong has downgraded the U.S. rating from A to A-
Thumbs down: Chinese rating agency downgrades US
Dagong thinks the US government debt, currently $16.7 trillion, and spread domestically and internationally, is rated too high.
Sixty percent of foreign currency holdings are in dollars, with a total dollar equivalent of $6 trillion.
If the US were to renege on its debt obligations, central banks around the world that hold Treasury Bonds as reserves would be in trouble.
China, which holds roughly $1.3 trillion in US Treasury bonds, and is quite vulnerable to a US economic collapse, criticized lawmakers handling of the debt ceiling debate. State-owned Chinese media lambasted it as a ‘manufactured crisis’.
Russia, the 11th largest holder of US debt with $131.6 billion, has significantly reduced its stake in Treasury Bonds.
According to Bloomberg, Russia has trimmed its holdings by 25 percent from a record high on October 31, 2010.
“Such events result not only in short-term jumps in volatility, but also an erosion of trust in the dollar as a reserve currency and the American financial system as a whole,” Nabiullina told Bloomberg in an emailed statement on October 15. –http://rt.com/business/china-dagong-us-downgrade-306/
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