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What kind of impact does the Chinese downgrade of US debt have in the US and internationally?
In the run-up to the debt ceiling deadline, stateside credit rating agency Fitch threatened downgrade US sovereign debt rating. Congress acted on time and that was that. But last week, we found out that US credit rating did get slashed, from an A to A-, by a credit rating agency in China by the name of Dadong, based in Beijing.
At around the same time, an editorial writer for Xinhua, the China’s official news agency, wrote an op-ed piece calling for a “de-Americanized world” and the creation of a new world reserve currency to replace the U.S. dollar.
What is Dadong? What kind of impact does the Chinese downgrade of US debt have in the US and internationally? The idea of phasing out the dollar as the world’s reserve currency is not new, but given chronic political instability in D.C., is the world giving that proposal another look?
Michael McDonough, Bloomberg Chief Economist and China expert. He tweets at @M_McDonough