By Peter Schroeder - 08/03/11 02:14 PM EDT
Washington's deal to raise the debt limit might have staved off a default and taken some steps to addressing the deficit, but a Chinese credit rating agency nonetheless downgraded the nation's debt Wednesday, blasting Congress in the process for "leaving the world in terror."
The Dagong Global Credit Rating Co. said that while the debt-limit deal does allow the government to continue borrowing, it does nothing to change the fact that the nation's debt is outpacing its economy and revenue. Calling the deal a "turning point for the U.S. government's solvency to decline even further," the firm dropped the rating to A from the already low A+.
"At this crucial juncture, neither the Democratic Party nor Republican Party has shown any consideration for the general interest in order to argue for their own partisan interest," the firm said. "They had a hard time making the correct choice in a timely manner, leaving the world in terror."
In addition, the firm said that a third quantitative easing effort from the Federal Reserve is a certainty, and will lead to disastrous consequences.
Federal Reserve Chairman Ben Bernanke has indicated further stimulus could be on the way from the central bank, but that no immediate plans were in place. If the Fed were to pursue more easing, Dagong said, it would "throw the world economy into an overall crisis; the status of [the] U.S. dollar will be essentially shaken in the process."
Dagong, created in 1994, has only been rating sovereign debt for a year, and has consistently ranked China above the United States in its rankings. However, the Securities and Exchange Commission refuses to recognize the firm's ratings alongside other top raters across the globe, arguing that the firm could not consistently meet U.S. reporting rules.
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