Ouroboros or the snake that is eating its own tail!
For those of you who don’t know it, China has its own rating agency. It is called Dagong Global Credit Rating Group.
This week the Dagong Global Credit Rating Group reduced its credit rating for the U.S. to A+ from AA, citing a deteriorating intent and ability to repay debt obligations after the Federal Reserve announced more monetary easing. Of course the major US rating agencies still give the highest rating to the US.
So, which view from the Chinese and the American view is the closest to reality? Maybe this is not the most important question right now. Actually what is more important to know is whether China still buys US government bonds? Actually it seems that China has been less inclined to buy US government bonds recently and so have been other Asian countries.
So who is buying US government bonds right now then? The response is: The Fed! This is like a snake that is eating its own tail! and the animal is very hungry…
Drawing by Theodoros Pelecanos, in alchemical tract titled Synosius (1478).