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Re: China Has a AA- Credit Rating According to S&P

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Yobobo10 is not online. Yobobo10
Joined: 14 Oct 2009
Total Posts: 3711
26 Feb 2012 03:37 PM
Wat? How did they evaluate China having a AA- rating, but nations plagued with debt (and mostly smaller GDPs) retain AA+ and AAA ratings?
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 03:40 PM
The rating isn't decided by how much debt a country has. It's decided by judging how reliably a country will be able to pay back their debt in the future. Or, in other goods, how good an investment it is to buy their debt.
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Yobobo10 is not online. Yobobo10
Joined: 14 Oct 2009
Total Posts: 3711
26 Feb 2012 03:57 PM
Yes, but why does China (with it's however many trillion hidden under a humongous bed) have a higher risk of defaulting in an AA- rating, than Britain (with it's -1,000,000,000,000 monez) having a AAA?
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 04:05 PM
Because China has a highly volatile economy. The fundamentals of their economy are weak. It's true that they're experiencing impressive growth. But the question is WHY are they experiencing such growth? Their growth is driven partially by rampant construction, without having fast enough population growth to justify it. Most people have heard of these "ghost cities" in China. Tens of thousands of residences just left empty- without anybody moving in. Similarly, China has the largest mall on Earth; and it's a ghost mall. There are no stores in it. What we are seeing now, in China, is the development of the largest real estate bubble in human history. And when it pops, China's GDP growth will quickly slide into the negatives.

I wouldn't advise buying their debt.
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Yobobo10 is not online. Yobobo10
Joined: 14 Oct 2009
Total Posts: 3711
26 Feb 2012 04:21 PM
But the US had a housing bubble, people still brought their debt.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 04:26 PM
Well, yeah, the US had a housing bubble vs the the "largest real estate bubble in human history" that China has. The US economy does not depend on construction as much as the economy does. And China is already poor ($8000 per capita) compared to the US ($48,000 per capita) so a housing bubble would hurt them more than it could ever hurt us.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 04:27 PM
*the Chinese economy
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Twigs180 is not online. Twigs180
Joined: 10 Mar 2008
Total Posts: 18664
26 Feb 2012 04:49 PM
Also Chinese currency is inflated beyond belief.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 04:53 PM
But that's good for exports!

(or so a Keynesian would tell you)
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Twigs180 is not online. Twigs180
Joined: 10 Mar 2008
Total Posts: 18664
26 Feb 2012 05:22 PM
But not for the people!
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 05:25 PM
The truth is that China doesn't care what is good for the people. China probably has the best economy in the world (GDP% that goes to national debt)
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 05:26 PM
China probably has the best economy in the world (GDP% that goes to national debt)
___
No...
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 05:48 PM
China's economy is much better than America's economy.

ht
tp://en.wikipedia.or
g/wiki/List_of_countries_by_public_debt
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 05:51 PM
Debt only becomes an economic problem when you can't pay it. The US is better able to pay its debt than China.
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 06:47 PM
China owns 9.8% of America's 15 trillion dollar debt. Meaning the Chinese own about 1.5 trillion dollars of the US's debt. The Chinese have 538 billion dollars of debt. Which is easier to pay off, 538 billion OR 15 trillion. China could call in the 9.8% and they will have payed off their own debt and have surplus cash.
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Person299 is not online. Person299
Joined: 28 Feb 2008
Total Posts: 7952
26 Feb 2012 06:54 PM
^
Most of China's debt isn't recorded, they have a lot more debt than 538 billion. And a lot smaller economy.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
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26 Feb 2012 07:05 PM
China owns 9.8% of America's 15 trillion dollar debt. Meaning the Chinese own about 1.5 trillion dollars of the US's debt. The Chinese have 538 billion dollars of debt. Which is easier to pay off, 538 billion OR 15 trillion. China could call in the 9.8% and they will have payed off their own debt and have surplus cash.
___
amount /=/ ability to pay

Person A is unemployed and is $30,000 in debt. Person B makes $100,000 a year and is $90,000 in debt.

Who has a greater ability to pay?
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 07:05 PM
^

Smallest debt percentage I could find for Chinese controlled debt in America was 9.8%. I found 70% on the WASHINGTON POST. Even if China has a "smaller economy" I showed that China is able to put less cash from it's GDP into its debt from the wiki link.
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 07:07 PM
>amount /=/ ability to pay

Person A is unemployed and is $30,000 in debt. Person B makes $100,000 a year and is $90,000 in debt.

Who has a greater ability to pay?
-----------
China isn't unemployed, it has the 2nd highest GDP in the world. China has less debt and has the 2nd highest GDP.

Person A makes 20,000 a year and has 2,000 dollars of debt. Person B makes 100,000 a year and has 90,000 dollars of debt.

Who has the greater ability.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 07:10 PM
No no no, you implied that having less debt means you were more able to pay.

And the US has the largest GDP...

Let's say Person A makes $8000 a year (which happens to be China's GDP per capita) and Person B makes $48000 a year (oh hey! that's the US's GDP per capita). Who has the great ability?
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 07:28 PM
Well the error in that is that China owns (according to the Washington post)70% of America's debt. America has to pay China back. Look at it this way, China exports more than they import. America imports more than it exports.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 07:47 PM
Please link me to the WP article you're referring to.

Also:
http://goo.gl/OfSmD

AND DEBT DOES NOT EQUAL ECONOMY. DEBT HAS VERY LITTLE TO DO WITH THE ECONOMY. IT'S RELATED TO GOVERNMENT SPENDING, NOT THE ECONOMY.
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 07:53 PM
>AND DEBT DOES NOT EQUAL ECONOMY. DEBT HAS VERY LITTLE TO DO WITH THE ECONOMY. IT'S RELATED TO GOVERNMENT SPENDING, NOT THE ECONOMY.
------------
China owns 70% of what America makes in cash. I would say that is related to economy.

Washington Times, sorry, but type this in on Google, Washington times china owns 70% of America debt. 1st link.
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Avogadro is not online. Avogadro
Joined: 14 Nov 2010
Total Posts: 4011
26 Feb 2012 08:05 PM
It doesn't say that China owns 70% of America's debt. It says that 70% of the debt China does own, is American.
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DrCaneJralt2 is not online. DrCaneJralt2
Joined: 20 Jan 2012
Total Posts: 1126
26 Feb 2012 08:08 PM
Excerpt.

"Despite recent government reports that China's holdings of U.S. Treasury ... Under the widely held assumption that 70 percent of China's $2.4 trillion in ... that China probably holds about $1.7 trillion in U.S. government debt."

If you read that excerpt you will see that government reports say China holds the US treasury and it is assumed that China owns 70% of American debt.
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