US Sovereign Debt Downgraded

Discovered an Associated Press article yesterday reporting that a (the?) Chinese rating agency has just declared American sovereign debt to be less safe than that of China and 11 other countries. Here's a link: http://news.yahoo.com/s/ap/20100711/ap_on_bi_ge/as_china_debt_ratings

The article states: "Dagong, founded in 1994 to rate Chinese corporate debt, says it is privately owned and pledges to make its judgments impartially. But in a sign of official support, its announcement Sunday took place at the headquarters of the Xinhua News Agency, the ruling Communist Party's main propaganda outlet."

Is this an early warning of trouble for the USD and treasury bonds?

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Permalink Reply by Steven Vincent on July 14, 2010 at 12:19pm

Tough to know what to make of it. The dollar inflationists certainly jumped all over this. The dollar is going down but it hit major long term resistance and risk is back on at the moment. I think the sovereign debt matter will eventually be the next big shoe to drop but it could be a few years down the line after another big inflationary round.