"The US Has Already Defaulted"

The Dagong ratings agency, China's equivelent to Moody's or Standard and Poors, has just fired a major warning shot over the bow of the US financial jugernaut, known as the US dollar. China, of course, being the second largest holder of US debt (second only to the US's own Federal Reserve) cannot ignore the fact that Bernanke and crew have deceitfully and systematically devalued the US dollar to keep the Ponzi scheme rolling for a while longer.

China is getting closer to having to make the key decision on whether or not they wish to remain the US's sugar daddy.

From Zero Hedge

The soundbite of the day comes from AFP which quotes the infamous Chinese Rating Agency Dagong, known for being a little too truthy, which told state media Global Times what everyone already knows but is afraid to say out loud: "'In our opinion, the United States has already been defaulting....Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies - eroding the wealth of creditors including China, Mr Guan said."

Oddly enough, this contradicts Tim Geithner's heartfelt appeal that the US is pursuing a strong dollar policy. The Dagong announcement follows on the heels of various reports from earlier this weeks (most notably the SAFE announcement which was subsequently pulled) which are urging China to not only pull its US holdings, but to minimize its USD exposure in total. Now if only Moody's would opine on the stealth 1.5 TARP Chinese bailout we noted earlier this week, then the full out credit rating cold war would be on like Donkey Kong.

UH OH!

reply to post by TruthWithin


Ok...so what exactly does this mean? I have always been a researcher in the "unknown" as my reality within the Government seems useless as I feel so powerless against anything that is going on.

With that said, as I have gotten much older and see America changing at a rapid rate I am now struggling to understand it ALL.

So....again, what does this mean ( to dummies).

Originally posted by MamaJ
reply to post by TruthWithin

 

Ok...so what exactly does this mean? I have always been a researcher in the "unknown" as my reality within the Government seems useless as I feel so powerless against anything that is going on.

With that said, as I have gotten much older and see America changing at a rapid rate I am now struggling to understand it ALL.

So....again, what does this mean ( to dummies).

it means
when China cashes in its chips
we all get F'ed in the A

reply to post by MamaJ


The issue with fiat currency (any currency that is not backed by anything physical, ie Gold, Silver etc.) is that it is nothing more than an agreement of all governments and people of the world. Here in the US right now, there is a massive debate in Congress where politicians are usuing this to gain political leverage and they are playing chicken with the US dollar. If China makes the call that the US will NEVER be able to repay it's debt, they will sell all of their T Bills and "cash out". The US needs that debt like a junkie needs a needle and you do not want to be in the US if the party ends and no one wants Dollars anymore.

There are already so many signs that the dollar will no longer be the reserve currency in the world, and once reserve status is gone - the US's ability to simply print money to cover it's own debt is over. It really is a sick game of Russian Roullete at this point, only I fear that there is more the one bullet that is being loaded into the gun!

I am in Real Estate..people are still buying and still selling (Tennessee). Is it possible (and forgive me if this sounds stupid) that if you do not "own" your home the bank or government will be able to at will take it? I have wondered that and posed the question to several people with no answer. What do you think?

Also, is there a solution to bring back the American Dollar and economy in your opinion?

Thanks!

What this means is that China is not so diplomatically warning the US to stop monetizing it's debt to China....

China wants to maintain the integrity of what US holdings it has left as it continues to sell them off slowly. It already has liquidated 97% of its short term treasuries and is now looking to cash in on long term treasuries. Even this past week, there were hardly any takers of the offereings of US treasuries to finance our debt... as such, the US may now be forced to raise interestrates on the return to make our debt more appealing...this in turn will raise interest rates here at home.

Japan was picking up the slack prior to the earthquake-tsunami-nuclear meltdown...but is now cashing in also to generate money to rebuild.... even more US dollars are now floating around driving down the value even further.

Too much money chasing too few goods equals inflation... and there will be inflation aplenty this second half of year.

Basically, the Obama-US Fed-US Treasury has shredded the integrity of the US Dollar...it is now monoply money...

I owe you 1billion dollars ...ok, print it up and here ya go

I owe you 1 trillion dollars..ok, print it up and here ya go....

I owe you 10 trillion dollars...ok, print it up and here ya go.

That is why the world is really concerned about the dollar and so many are backing away from it.

Add to that the mess in Greece. The big banks and the US have taken the loans to greece and repackaged them as derivatives or stocks for sell and trade...much like the mortage loans from 2007-8...Greece is on the verge of default...making all of those derivatives worthless and crashing the bottom line of all these "too big to fail" global institutions...this is why Germany and the US are having to rah rah the banks to loan even more to Greece.

I just read an interesting article about the real estate bubble in China and how they are building massive cities that are empty to continue the illusion of growth on the books... artificially propping up the markets and keeping a new and restless middle class working.

The whole thing sounds like a house of cards being built in the back of a bus on a bumpy road...the whole damn thing is gonna fold up...sooner than later.

reply to post by AlreadyGone


Thanks for the clarification and broken down like that made it easier to learn. Thank you! Also, do you mind answering my above question about ownership?

Thanks again!

reply to post by MamaJ


The Government can sieze any property at anytime, whether you own it or not. There does however have to be justifiable cause for Imminent Domain. Bill Clinton for example, in his last few months in office, claimed thousands of acres of private homes declaring the area that they resided to be newly added property to National Parks.

So it's not unheard of.

But they can't seize property just for the sake of taking it, usually property is claimed by the government if a felony is committed. Like running a methlab.

Also, is there a solution to bring back the American Dollar and economy in your opinion?

No. The Dollar, as OP pointed out, is backed by faith. And oil technically. Because our economy has such a negative ballance, that is the value of goods we make vs the amount we buy, inflation of the currency by Reserve policy is inevitable. This means a constant and continuous decline of the USD, which has devalued now over 30% in the past decade alone. For debt holders while we have such low interest rates a decline of 3% a year (average) means a net loss of about 2% on average. So why buy our debt if you loose money doing it? Eventually we will get to a point that we have to raise interest on debts we issue in order to sell the debts to buyers other than our own Reserve Bank. This would devalue the Dollar further as we will either have to issue more debt to cover interest or print to cover interest. Governments lower the value of currency to lower the value of outstanding debts... when lowering value of the debt the real outstanding deficits are easier to manage.

Because we don't create enough wealth (most of our wealth is driven by the financial industries, and that is only a cycling of wealth, capital management and the likes) I cannot see how our economy will ever compete with rising industrial powers. America is slowly fading into obscurity.

reply to post by MamaJ

Is it possible (and forgive me if this sounds stupid) that if you do not "own" your home the bank or government will be able to at will take it?

The US government can do that at anytime by use of imminent domain wither you "own" (paid off the mortgage) or not. Banks and businesses can foreclose on your property for not paying utility bills and or being behind in your mortgage payments. Even if you have the deed, they can still take the property. Simply put, you can never own any property in the US. It can be taken from you at anytime by their discretion.

On topic. No one really wants to state the obvious that the US Treasuries are really in junk status. The Fed plays the old shell game with what it buys and hopes no one notices. The only problem is that everyone does but like the Emperors new cloths, who's going to tell the US that its walking around naked? China however may play the part of the young boy that points out the bare facts (pun intended).

I'm no expert when it comes to all this, but I have been watching the Dow Jones drop very slowly over the last month or so.

It was up at 12800, but today it is down to 11980.. down 144.26 today..

It's had its moments of upward growth, but the trend has been down..

How far it will go is yet to be seen but I am watching it drop..

Why it is dropping only an overall view of the market can say..
www.bbc.co.uk...

reply to post by TruthWithin


Too bad.

The Chinese have been devaluing their currency for years in order to create a trade imbalance. They can screw themselves.

The Chinese also have to know what a bad investment is, hey poop happens. Investing in a government that has no control over its own spending, that's not very smart.

I think it is time for us to start giving the middle finger to the Chinese. They only hold a small portion of U.S. debt anyways (most belongs to Fed banks who can screw themselves also). This will collapse and do away with the present system nicely. The U.S. too blessed as a country to have prolonged recessions.