… the currency war is not over yet.
In earlier blogposts we discussed the current situation between China and the USA. Each country tries to lower the value of its money to boost their exports hoping to gain advantages for their economy.
After the FED announced to push even more money into the US market the next move was expected by China.
Now the newly established “independent” Chinese Rating Agency “Dagong Global Credit Rating” lowered their rating for the USA by one step from AA to A+ (Welt online, 10/11/2010). Their explanation behind this step is as follows:
“The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment.”
American Experts are of the opinion, that this move is politically motivated and one has to question whether the Chinese Rating Agency is really independent or only again “just a tool for Chinese policy” (Paul Krugman, NY Times).
Although Dagong might not have as much influence with their Credit Ratings as the big three American Rating Agency Standard & Poor’s, Moody’s and Fitch, I think this step will still have an impact on the American economy.
And this currency war definitely does not help the overall economic situation.