China Calls Our Bluff

The US is Insolvent and Faces Bankruptcy as a Pure Debtor Nation – Published on Global Research.ca, by Washington’s Blog, July 25, 2010.

As the Financial Times notes, the head of China’s biggest credit rating agency has said America is insolvent and that U.S. credit ratings are a joke: … //

… The Scary Part:

I chatted with the head of a small investment brokerage about the China credit rating story. Because he gives his clients very bullish, status quo advice, I assumed that he would say that China was wrong. To my surprise, he simply responded:

They’re right. What’s scary is that China knows it.

In other words, everyone who pays any attention knows that we’re broke. What’s scary is that our biggest creditor knows it.

Tricks Up Their Sleeves?

China has been threatening for many months to replace the dollar as the world’s reserve currency (and see this). And China, Russia and other countries have made a lot of noises about replacing the dollar with the SDR. See this, and this.

Gordon T. Long argues that the much talked about gold swaps are part and parcel of the plan to replace the dollar with the SDR. Time will tell if he’s right.

China, of course, is not without its own problems: See this and this.

In related news, Germany’s biggest companies are starting to shun Wall Street as too risky. (full text) …

Link: a contradictory statement: Why the U.S. Need Not Fear a Sovereign Debt Crisis, by Ellen Hodgson Brown, July 24, 2010, and 17 comments.

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