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Is The U.S. Effectively In Default Already?

Sunday, June 19, 2011 - 8:10 PM
Last week, Chinese rating agency Dagong Global Credit said that the U.S. "has already been defaulting," in its opinion. It based this assertion on its assessment of the value of the dollar, which it said has been declining. The principle here would be that the U.S. debt and its interest was worth less than anticipated, because it's denominated in U.S. dollars, which Dagong says have weakened against other currencies.

Neither Moody's nor S&P share the view of Dagong, however. In fact, the value of a currency does not come into play when the U.S. agencies provide a sovereign debt rating. Each analyst said that the rating is simply based on the country's ability to pay, no matter how much value a currency loses over the life of the debt. It's the job of the investor to worry about currency valuation.

MikeMike327 posts since
Feb 22, 2010
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