In a development that has been almost completely ignored by the mainstream media in the USA, a global bond-rating agency in China has downgraded its rating of US federal government debt to BBB+, likely the lowest rating that US government debt offerings have received in a very long time. Bond ratings are very important as a very high rating indicates the bonds are safe and the government backing them is solvent enough to assure prospective buyers that bonds will be paid off over the length of the bond. Dagong, the Chinese rating agency, not only downgraded the US federal government bond rating, but also gave it a negative outlook. That indicates that further downgrades are likely in the future. Details about this rating downgrade can be found in the first link and second link. The third link offers a composite listing of many of the world’s major rating agencies, and the Dagong agency’s ratings are listed among them. The ratings of the world’s nations are listed for the various rating agencies in the third link. In reviewing the Dagong agency’s rating of the world’s nations, the USA has been downgraded to the same bond rating as Colombia, Peru, Spain, Turkmenistan and the UAE.
The US ratings agencies have very high ratings for US bonds in spite of the fact that the US federal debt doubled from approximately 10 trillion to 20 trillion just during the presidency of Barack Obama. It has been fairly widely reported in the media that Obama ran up as much debt as did all the previous presidents combined! That is a record of breathtaking profligacy that can hardly be described or understood. It means that President Trump has inherited a very-nearly insoluble problem. I suspect that the US bond rating agencies have been told to keep the rating of US bonds very high “or else.” Nothing else seems to justify their high rating of US federal bonds given the runaway spending and borrowing profligacy of the US federal government for decades.
Significantly, the Chinese rating agency stated that an over-reliance on debt financing will “…continue to erode the solvency of the US Federal Government (emphasis added).” Let that statement sink in for awhile. The endless and uncontrollable debt spending by the US government is “eroding” US solvency. At some point, this unstoppable trend will reach the point where the world realizes the US federal government cannot and will not repay its debts and the US federal government will then be “insolvent.” This is an extremely serious situation, but the US citizenry neither realizes this dire trend is in place nor does it care. It will care when this debt bubble finally bursts.
Did I say the word “bubble?” I guess this puts me in some pretty respectable company. Former US Federal Reserve Board Chairman, Alan Greenspan, recently warned that we are now living in a “bond market bubble” (fourth link). He added that he has a “rather dismal” long-term outlook for the bond market. In the fifth link, Greenspan warns that both the US bond market and the US stock market are in bubbles, and he cites the “growing federal deficit” as the reason for these twin bubbles. Greenspan also warned that the US economy is “…working, obviously, toward a major increase in long term interest rates (emphasis added).” How big will be the coming “major increase” in US interest rates? He left that question unanswered. When higher interest rates start affecting US consumers and borrowers, the US public will start taking notice of how the federal deficits are causing this problem. Expect politicians to blame everyone but themselves.
When I watch or read the US financial media, I now laugh when I hear that investors are buying US bonds in a “flight to quality.” There was a time when US bonds were a very high quality investment, but as the Dagong rating downgrade confirms, that time is over. Expect more downgrades ahead. Given the pressure on US ratings agencies to keep the US ratings artificially high, they may keep US bonds rated as AAA right up to the time the bond market bubble finally bursts. While the US public is unaware of the ratings downgrade by the Chinese rating agency, all the world’s major governments and financiers surely noticed it, and they also saw Alan Greenspan’s warning. The obvious question is: How long do we have until the bond market bubble bursts? There is currently no answer to that question. It may happen very soon or this bubble may continue to inflate for years yet. What we do know is that it will burst…eventually.
In recent posts, I have examined the possibility that a collapse of the EU and Eurozone may lead to a collapse of the Euro, which would cause a severe global financial crisis, and which could also lead to the fulfillment of the prophecy in Revelation 17-18 that the global financial/monetary/commercial system of the latter days of this age will experience a sudden and complete collapse. The fact that the USA is in a bond and stock market bubble according to Alan Greenspan and others cited in these links makes us face the fact that the collapse of the global economy could begin with a catastrophic global loss of confidence in US bonds and in the solvency of the US federal government. Revelation 18:10, 17 and 19 all prophesy that this global collapse will occur in “one hour.” In today’s digitally-interconnected world, a collapse in any one part of the global financial system could quickly spread to all other global financial markets within one single hour, tearing them all down at once. The trigger that sets this collapse in motion could come on the US side of the Atlantic Ocean or it could occur on the European side of that ocean. As long-time readers know, I do not make specific predictions by dates. I do predict that Revelation 17-18 will be fulfilled in our future, but it will happen at a time of God’s own choosing.
For an in-depth analysis of the relevance of the prophecy in Revelation 17-18 to our current time, please read my articles, Is Babylon the Great about to Fall…Ushering in a New Beast System? and The Babylonian Origin of the Modern Banking System.The former article was written in the aftermath of the great financial crisis that hit world markets in 2008, but its content and analysis of the as-yet unfulfilled prophecy in Revelation 17-18 makes it just as timely today as when it was first written.
- https://www.reuters.com/article/us-usa-ratings-dagong/chinese-agency-dagong-cuts-u-s-sovereign-ratings-to-bbb-from-a-idUSKBN1F50OU
- https://www.thestreet.com/story/14449526/1/china-ratchets-up-pressure-in-trump-economic-war-as-dagong-cuts-us-credit-rating.html
- https://en.wikipedia.org/wiki/List_of_countries_by_credit_rating
- https://www.cnbc.com/2018/03/01/ex-fed-chair-greenspan-we-are-in-a-bond-market-bubble.html
- https://www.marketwatch.com/story/alan-greenspan-says-there-are-two-bubbles-in-stocks-and-bonds-2018-01-31
