Sunday, 7 August 2011

The Unhappy Creditor

The markets didn't look good on Friday with American stocks sliding precariously downhill thanks to Standard & Poor's downgrading the US' credit rating from AAA to AA+. The stock market was only temporarily buoyed by optimistic employment numbers for July.

Some analysts were saying how the US was heading for a double-dip recession, which had been predicted as a possible outcome when the financial crisis hit in 2008.

China, the United States' biggest creditor at $1.2 trillion in US Treasuries was unhappy with S&P's decision and warned the US to be more frugal in its spending.

"The US government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," official news agency Xinhua said.

It predicted the rating cut would lead to more "devastating credit rating cuts" and global financial turmoil if the US fails to learn to "live within its means".

"China, the largest creditor of the world's sole superpower, has ever right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," it said.

Xinhua added the US must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over US dollar issues.

For some 30 years China has acquired US Treasuries -- and only those. Back in the day US dollars were a sure bet. But in the last few years it's strange to see the Middle Kingdom continuing to do this as if on automatic pilot; we all know we shouldn't put our all eggs in one basket.

But now it's gotten to the point where the US and several other countries have suggested China stop buying US Treasuries but it has refused to listen.

And now the US's credit rating has been downgraded and China is worried about its massive investment losing value.

It's interesting to see China demanding the US cut its credit addiction and even suggests supervision over the US dollar.

Isn't that akin to China meddling in another country's domestic affairs?

So if that's the case, does that mean we now have the right to criticize China on its human rights violations?

2 comments:

  1. being the biggest creditor of the world's most wealthy nation how come the standard of living of the average chinese is so poor?

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  2. I have it ironic that China is sticking their nose in business of the US when they constantly tell the US to butt out of Chinese affairs... Chinese gov't is a bunch of brainless hypocrites

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