Thursday, September 21, 2017

S+P cuts China's credit rating.

Showing understanding that the structure of the global economy is nothing more than a debt Ponzi, S+P credit rating service today cut China's credit rating for the first time since 1999 by one step down to A+ from AA-.   In their accompanying statement, S+P wrote, “China’s prolonged period of strong credit growth has increased its economic and financial risks,” S&P said. “Although this credit growth had contributed to strong real gross domestic product growth and higher asset prices, we believe it has also diminished financial stability to some extent.

In writing this commentary S+P admits that debt fueled growth is not a long term strategy.  Using debt in order to grow today only means that tomorrow the growth is going to be less than what it should have been because tomorrow's labor will have to fund its own daily consumption along with the work needed to grow tomorrow AND the interest cost of debt payments used to fund yesteryear's growth.  There is no bottomless pit of labor, it is all finite.  If the labor was strong enough to grow like this without the use of debt then no debt would have been taken on.  But China's massive debt is hidden from view and eventually it will blow up in grand fashion.

S+P 500 credit rating service is telling us we should be edging for the door.

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