Is the US government still approaching the verge of default crisis?
*The Wall Street Journal, by Natasha Brereton-Fukui, October 17, 2013
”China’s Dagong Global Credit Rating Co. on Thursday downgraded its view on U.S. government debt, saying the country was on the verge of default, despite an 11th hour deal that ended the budget standoff.
In a lengthy statement, Dagong — which cut the U.S. rating to A-minus from A, and maintained a negative outlook — described the partial government shutdown as ‘an inevitable outcome’ of the U.S.’s long-term failure to pay its excessive debts, and a substantial deterioration in its solvency.
Traders and analysts said the move by Dagong added further fuel to a slide in the dollar. Already, the euro had picked up by half a cent from $1.3550 against the greenback, but the news helped to propel it further, to a high of $1.3638.
Gold also immediately rallied to $1,320.5 a troy ounce from $1,284.0 — a 2.8% surge — before dropping back.
The U.S. Congress passed legislation late Wednesday that reopened government through Jan. 15. President Barack Obama signed the bill, formally ending the 16-day shutdown.
But Dagong pointed out that the rate of growth in U.S. debt remained significantly faster than that of fiscal revenues and gross domestic product.
‘The government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future,’ Dagong said.”
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