This week right after the US again failed to address its debt issues and chose to kick the can down the road. Dagone, one of the top four Chinese rating agency's down graded the US credit rating from A to A-. This follows Fitch on Tuesday putting the US on Credit Watch!
The markets don't seem effected by the news and are shrugging it off. Even the main stream financial news mostly find it uneventful and have downplayed their reporting on it.
There are some...like me, who are wondering if this is just the beginning of a much larger problem not yet taken seriously by those who benefit from not talking about it.
China is the largest US government debt holder in the world. They hold an estimated 1.3 Trillion in US bonds. That is nearly 23 percent of all foreign holdings. We are told these debt instruments are currently at manageable rates and if the economy grows enough, these will take care of themselves.
Where the problem lays...Is the economy is not growing, and certainly not at a rate that will archive this wishful thinking! Even with the 85 BILLION in stimulus each month being pumped into the economy by the Federal Reserve who is feverishly buying mortgage baked securities, our growth is anemic at best, and has been for many years!
The fear is...the unwinding of cheep rates on our massive debt is about to come home and bear a mighty economic blow to the US. If China's rating agency's are beginning to say we are a higher credit risk, they may also be reluctant and even unwilling to continue lending to us. This may cause a domino effect triggering higher rates on the massive accumulation of debt that our government has been professing as manageable, and would soon be unmanageable to a degree we have never seen before.
The real problem looming for the US is...the unwillingness of our elected leaders to confront the massive debt the US has and continues to compound. They don't want to seriously acknowledge the problems and formulate a plan to responsibly address these issues. You and I know these solutions won't come without pain. I guess what it comes down to is...how much pain are "We The People" willing to endure before "We The People" elect leaders who have the courage and character to speak the truth and make decisions based on whats is good for Americans and not for their own political expediency.
Joe Burnett
