Our boy, Bill Gross, is creating a stir with his comments that the US will lose its AAA rating. For the uninitiated, the rating is just another method of assessing the overall soundness of the United States or its likelihood of paying its debt.
The US has always been at the top of the borrowing ladder, because it's a wealthy nation, etc., etc.
When the US government runs the printing press like it has in the past 8 years, all of that spending is bound to catch up sooner or later. China was previously hungry to finance all of this cash printing. Some economists estimate that China owns as much as 30% of the entire US Government debt.
China is no longer hungry for US debt/dollars. As was reported here, it has been dumping the dollar for gold and other currencies (probably the Euro). China is also experimenting with letting its yuan appreciate in value.
The investor economist in me doesn't think the US will lose its AAA rating. Bill Gross can be a bit sensationalist. There are even some suspicions that his comments are the result of a pump and dump. The USD won't be as wonderful against other currencies, but I don't believe that's enough to hurt the US debt ratings. It's unfortunate that the government has to resort to the Atomic Bomb of monetary policy by printing so many dollars, but there are some real signs the US economy is recovering. I trust this administration to let off on the throttle once the economy recovers. When that happens, everything will be peaches again.
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