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Bond Outlook by bridport & cie, April 20 2011

S&P has now followed the Chinese Dagong in questioning the AA rating of Treasury debt, another step in the loss of the “exorbitant privilege” of owning the reserve/trading currency.

You might wonder whether S&P, brave though they were in openly criticising their own government, might have found the courage, and inspiration for their actions from another rating agency? It seems that if you want to see an agency on the ball, and one that is prepared to downgrade a country, you need look no further than the Chinese agency, Dagong. They were first on Japan, and, more recently, the USA. Last November, we commented extensively on the Dagong downgrading and critical commentary of US monetary policy. We found it almost embarrassing to be on the same wavelength as a Chinese entity, but they at least claim independence from their Government, and are structured accordingly. (Our only problem is that “independent public expression of opinion in China” may be an oxymoron!)


Despite the USA’s flouting of its own laws and constitution (the unacceptable treatment of Private Manning of Wikileaks fame being a case in point), the country has a redeeming feature in that economic and political commentators can still express their views freely, without arbitrary arrest and disappearance as has been the case in the “Middle Kingdom”.

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