What message should the United States government take away from the first credit rating downgrade in its entire history? According to this bluntly-worded editorial from Xinhua, the state news agency of America’s largest creditor, the U.S must break its ‘addiction’ to borrowed money, the political ‘wrangling’ in Washington must end, and China’s dollar denominated assets must be protected.
The Xinhua editorial that everyone seems to be quoting today says in part:
The days when debt-ridden Uncle Sam could leisurely squander unlimited money borrowed from overseas seem numbered now that its AAA credit rating was slashed by Standard & Poor’s for the first time on Friday.
Although the U.S. Treasury promptly challenged the unprecedented downgrade, many outside the U.S. believe the credit rating downgrade is an overdue bill that America must pay for the short-sighted political wrangling in Washington and its burgeoning debt.
Fledgling Chinese rating agency Dagong Global degraded U.S. Treasury bonds late last year, when its move was met with arrogance and cynicism from some Western commentators. Now S&P has demonstrated that what its Chinese counterpart did was nothing but tell global investors the ugly truth.
China, the sole superpower’s largest creditor, now has every right to demand that America address its structural debt problem and ensure the security of China’s dollar denominated assets. To cure its addiction to debt, the United States must reestablish the commonsense principle that one should live within his means.
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