Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

On August 3 China’s Dagong ratings agency was the first to draw the obvious conclusion. It downgraded the United States from A+ to A. As Dagong remarked: “[A]t this crucial juncture, neither the Democratic Party nor Republican Party has shown any consideration for the general interest in order to argue for their own partisan interest; they had a hard time making the correct choice in a timely manner leaving the world in terror, which highlights the negative role of the US political system on an economic basis.”75 The US political system, the Chinese analysts concluded, “cannot resolve the fundamental influence of low economic growth, high deficit and increasingly higher debt to the debt service capability through increasing real wealth creation, with the declining national solvency irreversible. It is natural that QE3 monetary policy will be enabled for the next step, which will throw the world economy into an overall crisis; the status of [the] US dollar will be essentially shaken in this process.” This was the judgment of the G20 at Seoul turned into the language of credit rating. The year ended with a big sell-off of US government debt by Beijing. But there was no rout. The long buildup of Chinese claims on the US taxpayer had ended. But the portfolio stabilized at between $1.2 trillion and $1.3 trillion.