Some headlines grab your attention while most make you yawn. I know when I saw this headline, my jaw dropped and was shocked that it did not move the markets. I think soon enough it will, but investors are still in bullish mode due to the Fed providing nice swimming water with their ocean of money. Soon enough, I think more traders will move this news with more caution and selling. The headline is “China’s Dagong Downgrades US Sovereign Credit Rating.”
Sign of the Times
The U.S. has always been the envy of the world when it comes to financial power and status. Clearly that has been changing as the dollar has been destroyed and our debt has grown to ridiculous levels. Now Dagong Global Credit Co. Ltd. might not be a household name, but something like this happening in the past would border on blasphemy. Soon this could be par for the course.
Take a look at this statement from Dagong: “The occurrence and development of the credit crisis in the United States resulted from the long-standing accumulation of contradictions in its economic system.” They go on to say, “The U.S. debt burden can be relieved only to a certain extent through large-scale printing and issuance of the U.S. dollar. The consequent decline of the U.S. dollar status and national credit will block the debt revenue channel vital to the existence of the United States to a greater extent.” Wow! Those are pretty ominous words, especially the last part about the existence of the United States.
This is the path that Ben Bernanke is choosing to pursue with his printing press monetary policy. It might juice the markets right now, but economically I am skeptical that it will really help anything. I am not alone as most economists who have spoken out on QEII have blasted it and didn’t think it would produce anything except massive inflation and rampant speculation on risky assets.
In terms of stocks, the important factor is when investors will start paying attention to these kinds of headlines and the potential adverse effects of the QEII program. If traders start getting skittish and the market begins to fall, the bulls could feel some pain as the euphoria of the last 10 weeks is reversed. For now, the mood is still optimistic, but look out below once this changes. Evidently it already has for Dagong Global Credit.
How Can This Not Matter? is an article from: 
