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S&P Downgrades U.S. Credit Outlook: A Conspiracy?

China’s Securities Times published an article questioning Standard and Poor’s (S&P) intention to downgrade the outlook for U.S. credit. The article says, “As a pure U.S. credit rating agency, such an action is like a slap in the parents’ face. One cannot help wondering: Is S&P trying to regain the reputation it lost in the global financial crisis or is it a conspiracy?” The article quoted an economist who said that it is customary for the three large credit rating agencies to apply a double standard in reporting the credit ratings for domestic vs. foreign corporations. They usually overlook the problems in the U.S. domestic market, but are very “sharp” on the market trend in other countries, particularly those the U.S. does not like. In support of the conspiracy theory, the article quoted an analyst, who stated, “The crisis in Europe weakened the Euro and made the U.S. dollar stronger. Since the U.S. does not want a strong dollar right now, S&P downgraded the U.S. credit outlook in order to help the U.S. decrease the dollar’s exchange rate.” Zhou Xiaochuan, governor of China’s central bank, said, “Many rating agencies are not accurate in judging a country’s rating. The error rate is very high in reports at the national level, usually with a political purpose.”

Source: Securities Times, April 20, 2011