Full Report: Chinese Credit Rating Institute Downgrades Us's Credit Rating
Surveillance Report for Sovereign Credit Rating
The United States of America Sovereign Credit Rating:
Local currency/outlook: A+/negative
Foreign currency/outlook: A+/negative
Rating date: November, 2010
Analyst: LU Sinan, DU Mingyan
http://www.dagongcredit.com
Rating History:
Local currency/outlook: AA/negative
Foreign currency/outlook: AA/negative
Rating date: June, 2010
Dagong has downgraded the local and foreign currency long term sovereign credit rating of the United States of America (hereinafter referred to as “United States” ) from “AA” to “A+“, which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment.
The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment. Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors.
The rating bases for downgrading the sovereign credit rating of the United States by Dagong are as follows:
I. The U.S. government has not introspected on the question of the development and management model of the national economy from the global strategic perspective, which makes it very difficult for the U.S. to fundamentally change the passive situation of economic development.
After the outbreak of the financial crisis, the United States government has adopted a series of policies and measures aiming at rescuing the crisis and recovering the economy, such as: the government has purchased bad assets directly, injected capital to financial institutions and entity enterprises seriously hit by the crisis, increased investment in social security, education and energy, cut the tax rate of low and middle income families, and adjusted financial supervision, etc.. Looking at the effects, the U.S. government's efforts have achieved little success, falling short of initial expectations. The credit crunch is still proceeding and even deepening. The development course of credit crisis has shown a chart of debt crisis - economic crisis - monetary crisis - overall crisis. Currently, the U.S. credit crisis has developed into the monetary crisis phase. In order to rescue the national crisis, the U.S. government resorted to the extreme economic policy of depreciating the U.S. dollar at all costs and this fully exposes the deep-rooted problem in the development and the management model of national economy. It would be difficult for the U.S. to find the correct path to revive the U.S. economy should the U.S. government fail to understand the source of the credit crunch and the development law of a modern credit economy, and stick to the mindset of traditional economic management model, which indicates that the U.S. economic and social development will enter a long-term recession phase. The main evidences for this judgment are as follows:
First, the credit expansion policy has changed both the economic fundamentals and the operating mechanism of the U.S. economy. It is a basic state policy of the U.S. to take credit expansion as an engine of economic development. As a result of the highly developed domestic credit policy, the credit relations between the creditors and debtors have become the basic economic relations between social members. In addition, an international credit system, with the U.S. at the core, has been built up on the basis of international credit expansion, and international credit relations have become the basic economic relations between the United States and other members of the international community. Thus, the formation of the U.S. economic foundation has been changed, and credit relations have become a dominant driving force for economic and social development, the paradoxical movement of credit relations determines the direction of U.S. economic and social development. Due to the abuse of credit, the United States became a net debtor country in 1985. From then on, its economic and social activities have been completely based on the huge amount of debts. The status of the creditor-debtor relations not only influences the development model and performance of the U.S. economy, but also constitutes the basis for the nation to choose economic regime and make strategic choices.
Credit expansion has also changed the forming mechanism of United States credit demand, and the market has become the governing force to create the credit demand.
The U.S. globalization of social credit has also reached a high level, 30% of which comes from foreign capital. Therefore, the national capacity to adjust social credit demand through monetary policy instruments such as the money supply and interest rate has been greatly weakened. The change in the forming mechanism of credit demand has fundamentally strengthened the dominant role of market in the economy, which indicates the market-oriented social credit relationship would fully influence the U.S. economic and social development. The status of credit relationships in the United States restricts the country’s creative capability of actual value by affecting its economic structure. The heavy debt burden which exceeds the real debt repayment capability forces the state apparatus to satisfy the country’s capital demand in the manner of surpassing the speed of value creation by the real economy. The over-expansion of virtual economy is the result of the paradoxical movement of the credit relationship in the United States. Thus, Dagong believes that as long as the policy of credit expansion remains intact in United States, the development model of financialization of the national economy would not be changed and the key factors to induce long term economic recession would continue to play a role.
Second, the economic financilization and industrial hollowing-out in the United States has broken the normal relationship between the financial system and real economy, leading to the pursuit of the virtual wealth. As social capital was largely sucked into the financial system, the value of a huge amount of financial assets operating away from the underlying assets and basic economy is amplified in a surprising manner, making people more concerned about the increase in virtual wealth and less interested in creating real wealth; and a large number of entities were transferred overseas, resulting in a serious industrial hallowing-out, thus the country’s creative capability of actual wealth has been severely weakened. In addition, as the government has long relied on borrowing to carry out its administrative functions, it would gradually lose the autonomy to manage the economy though effective exploration of fiscal policy, and finally has to resort to the banknote printing machine, like killing the goose that lays the golden eggs. The improvement in the creative capability of actual wealth depends on the reasonable positioning of the financial system and real economy, and the adjustment process will determine the U.S. economic recovery and vision for future development.
Third, the U.S. global hegemonic strategy has consumed enormous national financial resources, but its own capacity of wealth production is insufficient to support its huge strategic target. The dependence on issuing national debt or U.S. dollars to carry out its strategy not only lacks sustainability, but also becomes the root of yielding fiscal deficit. A balance of state revenue and expenditures is advantageous to the sustained development of the U.S. economy. However, it is almost impossible for the U.S. government to abandon its global strategy. Hence, it will become a long-term factor to hinder the U.S. economy.
Fourth, long-term dependence on the U.S. dollar depreciation to export debt is not only harmful to the creditor’s interests, but is also unable to solve its debt dilemma. The problem of the national development strategy is that it causes the U.S. government to bear a huge debt burden; however the U.S. government is unwilling to adjust its strategy to reduce debt; rather, it believes that exporting debt through the U.S. dollar depreciation is more compliant with the interests of the United States. Although the U.S. dollar depreciation forces creditors to transfer their interests to the US, it will reduce the market confidence in U.S. dollars, which may trigger the trend of selling U.S. dollars. Hence, it will change the international currency system pattern, and the U.S. dollar hegemonic status will be shaken inevitably, which will ultimately affect the backflow of U.S. dollars, hindering the international financing channel of the U.S. government directly, and reducing its debt income. The debt income concerns the prosperity of the United States. To avoid the outbreak of debt crisis, it has to issue additional currency to solve the problem of insufficient debt income. Hence, the U.S. dollar starts a new round of depreciation, circulating on and on, which intensifies the risk of debt repayment inevitably.
Fifth, the reform of financial and rating systems has failed to fully reflect the essential requirements of the credit economy, and it is difficult to establish a basic service system of national economy that accommodates the development law of a credit economy, so as to push the U.S. economy into a path of revival. "Financial Regulatory Reform Act" is the main measure of the U.S. government to prevent further crisis, but its content shows that they have not really found the root of the problems within the U.S. financial system. The root cause of credit crisis can not be eradicated by simply resting on regulatory reforms.
The U.S. financial system has created a myriad of financial products, which attract the continuous influx of global USD capital. Foreign capitals make up the most important part of the U.S. economic ecosystem, and it is the driving force of this very system to obtain capital revenue through credit expansion, but the consequent problems are serious:
(1) social capitals are encouraged to engage in financial speculations, and the pursuit of virtual wealth rather than material wealth is not conducive for the United States to enhance its capacity of value creation; (2) credit activities have deviated from the proper role of supporting the development of real economy, the social credit demand is mainly determined by the market, and the extra credit created by the market becomes hot money that jeopardizes the country’s economic development. Furthermore, the government’s ability to regulate social credit is largely impaired by financial innovation products; (3) the financial system is composed of complicated credit relationships, which exacerbates the asymmetry of credit risk information and augments the probability of systemic risks.
The development of credit socialization should not suggest any change in the orientation of financial services. The essence of finance lies in the credit relations between the creditors and debtors. This relationship constitutes the whole of the social credit system, providing a system for distribution of funds for the real economy to create social wealth. As a result of the pursuit of value adding by means of credit innovation, the scale of social credit in the United States is in wild expansion, so that the threat of systemic credit risk becomes a constant phenomenon. With the continued depreciation of U.S. dollar, once its dominant position around the world is severely challenged, the financial system that relies heavily on the strong dollar will no longer support the national economy to operate in the current model. In this context the government will have to rebuild the national economic system, the social cost of which will be enormous. The U.S. government failed to make a master plan for the reform of the financial system from a strategic level, and the principles as well as the approach of the reform are ambiguous.
The ongoing reform aimed at practical interests is one that addresses the symptoms not the cause. Such a reform can not adapt to the historical requirement necessary for the recovery of the U.S. economy and improving the U.S. economic system. The crisis triggered by the failure of its credit rating system has almost destroyed the U.S. financial system. However the current reform measures do not address the fundamental problems and the U.S. rating system, tested by the financial crisis, is going to lose a historical opportunity of recovery. The main problem in the U.S. credit rating system is it treats the CRAs as general players in the market and does not encourage competition amongst them, and such a mechanism cannot ensure the CRAs will fulfill their public responsibilities. The U.S. credit rating systems lack of institutional guarantees to reveal credit risk cannot provide reliable credit risk information to the public and it is falling behind the development of the credit system. Therefore, to a certain extent, the credit system cannot provide effective funding to support the economic recovery and development.
Dagong believes that the deep-rooted reason for the credit crisis that happened in the United States is that the current model of economic development and management has deviated from the laws of credit economic development. Radically, it is the problem in the idea of governing the country and national strategy. The fact that the traditional way did not save the United States economy further proves that the U.S. government lacks the capability to rule the country by following the law of credit economy. The economic recovery in the U.S. depends on the change in the way of thinking of its government; however such a change is very difficult to realize whether the Republican or Democratic Party is in power. Therefore, the U.S. government will follow its lingering notion, consequently the economic recovery will last a long time and the government’s debt repayment capability will deteriorate even further.
II. Subject to the economic development model of the United States, the credit crisis is far from over, and the U.S. economy will be in a long-term recession.
The key economic data of the United States in three consecutive years since the financial crisis indicates a declining or slight recovery trend in GDP, the size of the banking industry and fiscal revenue, money supply, unemployment rate, fiscal deficit and the outstanding government debt remain at a high level. Adopting the extreme measure of continuous issuance of currency in the context of unconventional use of monetary and fiscal policies to save its economy indicates that the credit crisis in the U.S. financial field is evolving into a national crisis. The root cause is that something is wrong with the economic development model adopted by the United States. The consequent imbalance in the national economic structure requires the government to adjust its economic strategy in order to realize a new balance and create a new economic architecture for economic recovery. Therefore, Dagong analyzes and judges the prospects of the U.S. economy from the following aspects:
First, the motivational force of the U.S. economic growth is credit expansion and at present the huge debt is the result of long-term accumulation of credit expansion. Gone are the basic conditions that the economic recovery is realized through repeated use of credit expansion. Therefore, it is impossible for the U.S. economy to generate a driving force for healthy development unless it can return to the real economy and discover new areas of value creation. As of the end of 2009, the total debt, including that of the U.S. government, enterprises and household, amounted to 52.3 trillion U.S. dollars, while the GDP was just 14.3 trillion U.S. dollars in the same period. Without a massive increase in the real value of domestic production, it is impossible for the United States to acquire the capability of paying off its stock debt by relying solely on its current capability of value creation. Therefore, the U.S. economy would be bound to sink even deeper into the mire if it continues to rely on the credit expansion model of economic development.
Second, the U.S. capability of creating real wealth can not support its huge consumption. Under the current circumstance it is difficult to increase the speed of wealth growth; the only correct way out of debt reduction is mitigation of expenditure. Since the U.S. government will not adjust its national strategy, it is inevitable for the United States to increase debt or transfer debt by depreciating the U.S. dollar. The inevitability of such a move makes the dominant factor in the lasting stagnancy of the U.S. economy. In the components of the U.S. GDP in 2009, the financial services sector accounted for 21.4% while the real economy sector accounted for 65%.The total output value of the U.S. financial services industry is composed of two major parts: one is the transferred production value, most of which comes from value distribution of participating in international production. Another part is the inflated value originated from credit innovation, which belongs to bubble value. In addition, due to the high economic financialization, more than half of the profits in the real economy come from the returns of financial activities. If we exclude the factor of virtual economy, the U.S. actual GDP is about 5 trillion U.S. dollars in 2009, per capita GDP about $ 15,000. Meanwhile, the total domestic consumption was 10.0 trillion U.S. dollars and government expenditure was 4.5 trillion U.S. dollars. The production capacity of real value in the national economy is the material base to arrange social distribution and consumption. As the U.S. government arranges its budget according to the GDP including the virtual value, its revenue must fall short of its expenditure, so the socialization and normalization of debts will exacerbate the environment of economic development. It is predicted that the average real GDP per year of the United States will not reach 6 trillion U.S. dollar and per capita GDP will be less than 20,000 in the coming 3-5 years.
Third, the international division of labor and the import and export policies will make it difficult for the United States to realize balance of international payment. Based on the U.S. industrial structure, exports are mainly comprised of high-tech products, but the U.S. limits the export of technical products for strategic reasons; however, what the U.S. needs the most are daily necessities and energy, etc. In this case, imports are rigid, while exports are elastic. On the one hand, American products are not essential items for many countries; on the other hand, due to the policy restraint, it is difficult to effectively raise the export volume, all of these causes the U.S. to have long-term structural trade deficit. Ever since 1983, the current account deficit of the United States has been increasing by an average of 20% year on year. Even if considering the stimulation effect of U.S. dollar depreciation to export, the current account deficit is expected to maintain 4% of GDP for the next 3-5 years. The U.S. dollars outflow through current account deficit flows back to the United States through the capital account and financial projects, which supports its financial system to realize the transfer of international production value to the U.S. The U.S. imbalance of trade becomes an international wealth plundering system by exchanging domestic necessities with the export of the U.S. dollars. It is the barometer to measure whether the U.S. has the creative capability of actual value.
Fourth, it is difficult for the renewable energy development strategy to become the new focus of economic growth. The renewable energy development strategy proposed by the Obama administration is beneficial to inspiring people’s confidence in economic recovery, but it is still impossible to become an effective power to reverse the American economic development situation in a moderately long time, because the U.S. lacks the strategic investment capability that would make renewable energy an industry to transform the national economy. In addition, it is confronted with the formidable competition from Northern Europe in terms of the new energy technologies. Therefore, this strategy will exert very weak influence on changing the American economic structure and development model within a long period of time.
In general, it is difficult for the current economic structure used in U.S. economic development model to create sufficient material base to support its domestic consumption. Virtual economy gives tremendous impact on the safety of the national economic system.
The reform of the development model of the national economy forms the decisive factor to stop the economic recession and to realize the sustained development of the national economy in the post-crisis era.
III. Continuous economic downturn leads to increasing risks in the financial system and the trend of the U.S. dollar depreciation will cripple the value transfer capability of the financial system to attract dollar capital reflow.
After the crisis, the stability of the American financial system has not improved fundamentally; rather, it will face increasingly more serious rising trend of risks. After the financial crisis broke out in 2008, the large scale bailout program of the Federal Reserve and the U.S. government temporarily stabilized the financial system; the too-big-to-fail financial institutions benefited a lot. However, there are still toxic assets such as the huge financial derivatives hidden in the financial system waiting for effective disposal, and the future deleveraging process will take time. In addition, the long term high unemployment rate caused a rise in loan defaults. By the end of Q2 2010, the default rate of bank loans in the United States has achieved 7.32%, increasing for 17 consecutive quarters, in which the default rate in the housing loans has increased to 11.4%. Since the government withdrew the housing stimulus measures in April 2010, the real estate market has been in recession and the problem of foreclosure tends to become serious. It is estimated that the banks will face the repurchase pressure of nearly 220 billion U.S. dollars worth of real estate mortgage bond, which cannot be satisfied by the current provision for repurchase.
On the basis of 140 cases of bank failure in 2009, another 86 banks went bankrupt in the first half of 2010 and the current number of troubled banks has reached nearly 500. The end of 2010 is likely to witness a new rise in bankruptcy for small and medium-sized banks in the U.S.
The U.S. monetary policy used in dealing with the crisis has almost lost its effect in promoting economic growth. As a new economic driving force has not formed in the United States, the declining intention of individual consumption and corporate investment leads to the shrinking of monetary demand. Although the continuous loose monetary policy of the Federal Reserve has largely increased the basic monetary supply, it has failed to promote the expansion of domestic credit scale. The insufficient credit demand of real economy combined with the bank’s mood of reluctant lending during the period of economic downturn due to asymmetry of credit risk information, has resulted in the decreasing credit scale in the United States. Following the 10.3% decline in the amount of commercial bank credit and leasing in 2009, another 7.2% decline happened in the first three quarters in 2010 on a year-on -year basis. The large amount of liquidity accumulated within the financial system is mainly used for speculative financial transactions and flowing into foreign markets, which is neither conducive to promoting the development of real economy nor helpful for improving the chronic overexpansion of virtual economy.
The Federal Reserve’s monetary policy of continuous quantitative easing has temporarily reduced the long-term debt interest rate, but the consequent dollar depreciation trend will trigger the financial system’s long-term recession. The monetary policy of a new round of quantitative easing launched by the Federal Reserve on November 3, 2010 plans to release another 600 billion U.S. dollars of long-term U.S. treasury bond by the end of June next year. The direct objective of this policy is tomaintain the current low yield of the Treasury. The continuous U.S. economic downturnand the government’s increasing debt burden have undermined the foreign investors’ confidence in the Treasury. These investors turn to buy gold to avoid risk, which pushesup the price of gold and increases the pressure of a rise in long-term interest rate.
Especially for a highly-indebted economy as the United States, a large amount of financial derivative contracts in the financial system is related with the interest rate; the increase of long-term interest rates will cause another big fluctuation in the financial system, restrict the economic recovery, and increase the government’s burden of debt service. The Federal Reserve’s monetary policy can temporarily decrease the long-term interest rate, but it can also trigger the dollar’s depreciation and reduce the attraction of dollar-denominated assets to foreign investors. From June, 2010 until now, the U.S. dollar index has dropped about 6% and has depreciated 15% relative to the Euro, 11% relative to the Sterling Pound, 13% relative to the Yen, 18.5% relative to the Australian dollar, 11.4% relative to the Korean Won. The dollar’s continuous depreciation will cripple the value transfer capability of the U.S. financial system to attract the dollar capital to reflow, and the status of the U.S. as the global financial center is on the decline. Therefore, the room for implementing of monetary policy in the United States is increasingly being squeezed. On the one hand, the long-standing quantitative easing policy will only play a temporary role in decreasing interest rate, as a consequence the dollar depreciation is not conducive to the financing requirement of the United States as the largest debtor country and the interest assertion of the creditor will be the potential pressure to the increasing interest rate. On the other hand, the long-term economic downtown makes it impossible for the government to increase interest rate and regain a strong dollar policy. In this dilemma, any policies chosen by the Federal Reserve will hurt itself. Though it is likely for the current loose monetary policy to postpone the occurrence of the difficulties, yet in the long run, it will be proven to be a practice resembling drinking poison to quench thirst.
IV. New round of liquidity injection can not substantially reverse the trend of increasing the federal government’s fiscal deficit and debt burden in the long term.
The U.S. Monetary Authority launched the monetary policy of a new round of quantitative easing, announcing the release of a large amount of federal government Treasury bond continuously. However, it only has a limited positive influence for easing the current embarrassed fiscal conditions of the federal government. In 2009, the U.S. increased another 1 trillion U.S. dollars fiscal deficit in response to the financial crisis, making the ratio of year-end fiscal deficit to GDP a record 10.6%, and consequently led to more difficult fiscal operation for the government. Under these circumstances, the Federal Reserve took the measure of direct debt monetization, on the one hand, financing for the federal government’s fiscal deficit, and on the other hand, keeping the U.S. Treasury interest rate at a low level. The federal government’s financing cost and interest burden, therefore, are both controlled at relatively favorable levels.
Additionally, further depreciation of the U.S. dollar is inevitable due to the liquidity increased by the monetary policy of a new round of quantitative easing, and the U.S. government’s current debt burden, to some extent, is expected to be released. By the end of 2009, the balance of the U.S. government’s outstanding debts reached 12.3 trillion U.S. dollars, of which over 7.8 trillion U.S. dollars debts were held by the public including foreign investors. This is to say, if the U.S. dollar depreciates by 1%, the actual decrease of government’s debt burden will exceed 123 billion U.S. dollars, about 5.5% of its fiscal revenue in 2009. The U.S. base currency will be supplied with an increase of 30% on the existing basis in the coming eight months, therefore, in full consideration of such factors as economic recession and slowdown of currency circulation caused by shrinkage of private credit, a conservative estimate would be U.S. domestic inflation increase of about 1.5 percentage points and U.S. exchange rate index down approximately 10% before Q2 2011. As a result, federal debts will actually be reduced by over 250 billion U.S. dollars.
Public creditors’ interests are invisibly eroded due to the depreciation of U.S. dollar; especially the foreign creditors will suffer even greater losses from fluctuation of U.S. dollar exchange rate. Although the federal government could ease its actual debt burden to some extent via this channel, its sovereign credit will be adversely affected as it ignores the responsibilities of credit contracts and the legitimate rights and interests of creditors.
For a long time, the U.S. authority has not been temperate in its government credit expansion, resulting in large fiscal deficit and increasingly high government debts in consecutive years. Under current governance framework in the U.S., rigid expenditure accounted for a larger proportion of the fiscal expenditure to satisfy its global hegemonic strategy, which, on one side, increased the difficulty for the U.S. federal government to optimize its fiscal expenditure structure and control deficit growth, while, on the other side, made the federal government unable to have sufficient operating space in smoothing economic periodic fluctuation by fiscal policy instruments so that sustainable and steady economic growth cannot be guaranteed. After the breakout of the global financial crisis, the weak economic growth in the U.S., increase of the fiscal expenditure and the launch of the monetary policy of a new round of quantitative easing will all drive the U.S. debt burden to increase further. The pattern that the U.S. government has of a high fiscal deficit and heavy debt burden is essentially because of its terribly-flawed development model of debt economy, which can not be significantly improved by simply increasing channels for issuance of the U.S. dollar. Dagong predicts that the U.S. fiscal deficit will remain moderately high in 2010 and 2011, about 10.8% and 8% of the year’s GDP respectively. The federal debts will also increase in 2010 and 2011 on the basis of 2009, and the ratio to the year’s GDP will be as high as 95% and 97% respectively.
V. In essence the depreciation of the U.S. dollar adopted by the U.S. government indicates that its solvency is on the brink of collapse, therefore it wants to cut its debt through the act of devaluation with the national will; such a move has severely harmed the interests of creditors. The whole world, consequently, will have to face a period of dramatic adjustment of interest pattern.
The status of the U.S. dollar as the dominant international reserve currency determines that its depreciation gives an inevitable impact to the interests of all creditors.
In addition to the shrinking of creditors’ assets, the utter chaos in the international currency system triggered by the depreciation of the U.S. dollar will definitely damage the interests of all the creditors in the world at various levels. Together with the possibility of inflation in the future, the wealth of creditors will be plundered once again by the malicious act of currency devaluation conducted by the U.S. government after it suffered the losses during the financial crisis since 2007.
The value fluctuation of the world’s major currencies caused by the continuous devaluation of the U.S. dollar will push the adjustment in world interest pattern through the value comparison of the monetary system. The essence is to transfer the interests of the creditors to the debtor free of charge, and that will fundamentally destroy the international credit system and global economic system comprised of the creditor system and debtor system, resulting in an overall crisis around the world.
Outlook
Dagong believes that the occurrence and development process of the credit crisis in the U.S. resulted from the long-standing accumulation of the contradictions in its economic system; the U.S. debt burden can be relieved only to a certain extent through large-scale printing and issuance of the U.S. dollar; however the consequent decline of the U.S. dollar status and national credit will block the debt revenue channel which is vital to the existence of the United States to a greater extent. The potential overall crisis in the world resulting from the U.S. dollar depreciation will increase the uncertainty of the U.S. economic recovery. Under the circumstances that none of the economic factors influencing the U.S. economy has turned better explicitly it is possible that the U.S. will continue to expand the use of its loose monetary policy, damaging the interests the creditors. Therefore, given the current situation, the United States may face much unpredictable risks in solvency in the coming one to two years. Accordingly, Dagong assigns negative outlook on both local and foreign currency sovereign credit ratings of the United States.
The United States of America Sovereign Credit Rating:
Local currency/outlook: A+/negative
Foreign currency/outlook: A+/negative
Rating date: November, 2010
Analyst: LU Sinan, DU Mingyan
http://www.dagongcredit.com
Rating History:
Local currency/outlook: AA/negative
Foreign currency/outlook: AA/negative
Rating date: June, 2010
Dagong has downgraded the local and foreign currency long term sovereign credit rating of the United States of America (hereinafter referred to as “United States” ) from “AA” to “A+“, which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment.
The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment. Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors.
The rating bases for downgrading the sovereign credit rating of the United States by Dagong are as follows:
I. The U.S. government has not introspected on the question of the development and management model of the national economy from the global strategic perspective, which makes it very difficult for the U.S. to fundamentally change the passive situation of economic development.
After the outbreak of the financial crisis, the United States government has adopted a series of policies and measures aiming at rescuing the crisis and recovering the economy, such as: the government has purchased bad assets directly, injected capital to financial institutions and entity enterprises seriously hit by the crisis, increased investment in social security, education and energy, cut the tax rate of low and middle income families, and adjusted financial supervision, etc.. Looking at the effects, the U.S. government's efforts have achieved little success, falling short of initial expectations. The credit crunch is still proceeding and even deepening. The development course of credit crisis has shown a chart of debt crisis - economic crisis - monetary crisis - overall crisis. Currently, the U.S. credit crisis has developed into the monetary crisis phase. In order to rescue the national crisis, the U.S. government resorted to the extreme economic policy of depreciating the U.S. dollar at all costs and this fully exposes the deep-rooted problem in the development and the management model of national economy. It would be difficult for the U.S. to find the correct path to revive the U.S. economy should the U.S. government fail to understand the source of the credit crunch and the development law of a modern credit economy, and stick to the mindset of traditional economic management model, which indicates that the U.S. economic and social development will enter a long-term recession phase. The main evidences for this judgment are as follows:
First, the credit expansion policy has changed both the economic fundamentals and the operating mechanism of the U.S. economy. It is a basic state policy of the U.S. to take credit expansion as an engine of economic development. As a result of the highly developed domestic credit policy, the credit relations between the creditors and debtors have become the basic economic relations between social members. In addition, an international credit system, with the U.S. at the core, has been built up on the basis of international credit expansion, and international credit relations have become the basic economic relations between the United States and other members of the international community. Thus, the formation of the U.S. economic foundation has been changed, and credit relations have become a dominant driving force for economic and social development, the paradoxical movement of credit relations determines the direction of U.S. economic and social development. Due to the abuse of credit, the United States became a net debtor country in 1985. From then on, its economic and social activities have been completely based on the huge amount of debts. The status of the creditor-debtor relations not only influences the development model and performance of the U.S. economy, but also constitutes the basis for the nation to choose economic regime and make strategic choices.
Credit expansion has also changed the forming mechanism of United States credit demand, and the market has become the governing force to create the credit demand.
The U.S. globalization of social credit has also reached a high level, 30% of which comes from foreign capital. Therefore, the national capacity to adjust social credit demand through monetary policy instruments such as the money supply and interest rate has been greatly weakened. The change in the forming mechanism of credit demand has fundamentally strengthened the dominant role of market in the economy, which indicates the market-oriented social credit relationship would fully influence the U.S. economic and social development. The status of credit relationships in the United States restricts the country’s creative capability of actual value by affecting its economic structure. The heavy debt burden which exceeds the real debt repayment capability forces the state apparatus to satisfy the country’s capital demand in the manner of surpassing the speed of value creation by the real economy. The over-expansion of virtual economy is the result of the paradoxical movement of the credit relationship in the United States. Thus, Dagong believes that as long as the policy of credit expansion remains intact in United States, the development model of financialization of the national economy would not be changed and the key factors to induce long term economic recession would continue to play a role.
Second, the economic financilization and industrial hollowing-out in the United States has broken the normal relationship between the financial system and real economy, leading to the pursuit of the virtual wealth. As social capital was largely sucked into the financial system, the value of a huge amount of financial assets operating away from the underlying assets and basic economy is amplified in a surprising manner, making people more concerned about the increase in virtual wealth and less interested in creating real wealth; and a large number of entities were transferred overseas, resulting in a serious industrial hallowing-out, thus the country’s creative capability of actual wealth has been severely weakened. In addition, as the government has long relied on borrowing to carry out its administrative functions, it would gradually lose the autonomy to manage the economy though effective exploration of fiscal policy, and finally has to resort to the banknote printing machine, like killing the goose that lays the golden eggs. The improvement in the creative capability of actual wealth depends on the reasonable positioning of the financial system and real economy, and the adjustment process will determine the U.S. economic recovery and vision for future development.
Third, the U.S. global hegemonic strategy has consumed enormous national financial resources, but its own capacity of wealth production is insufficient to support its huge strategic target. The dependence on issuing national debt or U.S. dollars to carry out its strategy not only lacks sustainability, but also becomes the root of yielding fiscal deficit. A balance of state revenue and expenditures is advantageous to the sustained development of the U.S. economy. However, it is almost impossible for the U.S. government to abandon its global strategy. Hence, it will become a long-term factor to hinder the U.S. economy.
Fourth, long-term dependence on the U.S. dollar depreciation to export debt is not only harmful to the creditor’s interests, but is also unable to solve its debt dilemma. The problem of the national development strategy is that it causes the U.S. government to bear a huge debt burden; however the U.S. government is unwilling to adjust its strategy to reduce debt; rather, it believes that exporting debt through the U.S. dollar depreciation is more compliant with the interests of the United States. Although the U.S. dollar depreciation forces creditors to transfer their interests to the US, it will reduce the market confidence in U.S. dollars, which may trigger the trend of selling U.S. dollars. Hence, it will change the international currency system pattern, and the U.S. dollar hegemonic status will be shaken inevitably, which will ultimately affect the backflow of U.S. dollars, hindering the international financing channel of the U.S. government directly, and reducing its debt income. The debt income concerns the prosperity of the United States. To avoid the outbreak of debt crisis, it has to issue additional currency to solve the problem of insufficient debt income. Hence, the U.S. dollar starts a new round of depreciation, circulating on and on, which intensifies the risk of debt repayment inevitably.
Fifth, the reform of financial and rating systems has failed to fully reflect the essential requirements of the credit economy, and it is difficult to establish a basic service system of national economy that accommodates the development law of a credit economy, so as to push the U.S. economy into a path of revival. "Financial Regulatory Reform Act" is the main measure of the U.S. government to prevent further crisis, but its content shows that they have not really found the root of the problems within the U.S. financial system. The root cause of credit crisis can not be eradicated by simply resting on regulatory reforms.
The U.S. financial system has created a myriad of financial products, which attract the continuous influx of global USD capital. Foreign capitals make up the most important part of the U.S. economic ecosystem, and it is the driving force of this very system to obtain capital revenue through credit expansion, but the consequent problems are serious:
(1) social capitals are encouraged to engage in financial speculations, and the pursuit of virtual wealth rather than material wealth is not conducive for the United States to enhance its capacity of value creation; (2) credit activities have deviated from the proper role of supporting the development of real economy, the social credit demand is mainly determined by the market, and the extra credit created by the market becomes hot money that jeopardizes the country’s economic development. Furthermore, the government’s ability to regulate social credit is largely impaired by financial innovation products; (3) the financial system is composed of complicated credit relationships, which exacerbates the asymmetry of credit risk information and augments the probability of systemic risks.
The development of credit socialization should not suggest any change in the orientation of financial services. The essence of finance lies in the credit relations between the creditors and debtors. This relationship constitutes the whole of the social credit system, providing a system for distribution of funds for the real economy to create social wealth. As a result of the pursuit of value adding by means of credit innovation, the scale of social credit in the United States is in wild expansion, so that the threat of systemic credit risk becomes a constant phenomenon. With the continued depreciation of U.S. dollar, once its dominant position around the world is severely challenged, the financial system that relies heavily on the strong dollar will no longer support the national economy to operate in the current model. In this context the government will have to rebuild the national economic system, the social cost of which will be enormous. The U.S. government failed to make a master plan for the reform of the financial system from a strategic level, and the principles as well as the approach of the reform are ambiguous.
The ongoing reform aimed at practical interests is one that addresses the symptoms not the cause. Such a reform can not adapt to the historical requirement necessary for the recovery of the U.S. economy and improving the U.S. economic system. The crisis triggered by the failure of its credit rating system has almost destroyed the U.S. financial system. However the current reform measures do not address the fundamental problems and the U.S. rating system, tested by the financial crisis, is going to lose a historical opportunity of recovery. The main problem in the U.S. credit rating system is it treats the CRAs as general players in the market and does not encourage competition amongst them, and such a mechanism cannot ensure the CRAs will fulfill their public responsibilities. The U.S. credit rating systems lack of institutional guarantees to reveal credit risk cannot provide reliable credit risk information to the public and it is falling behind the development of the credit system. Therefore, to a certain extent, the credit system cannot provide effective funding to support the economic recovery and development.
Dagong believes that the deep-rooted reason for the credit crisis that happened in the United States is that the current model of economic development and management has deviated from the laws of credit economic development. Radically, it is the problem in the idea of governing the country and national strategy. The fact that the traditional way did not save the United States economy further proves that the U.S. government lacks the capability to rule the country by following the law of credit economy. The economic recovery in the U.S. depends on the change in the way of thinking of its government; however such a change is very difficult to realize whether the Republican or Democratic Party is in power. Therefore, the U.S. government will follow its lingering notion, consequently the economic recovery will last a long time and the government’s debt repayment capability will deteriorate even further.
II. Subject to the economic development model of the United States, the credit crisis is far from over, and the U.S. economy will be in a long-term recession.
The key economic data of the United States in three consecutive years since the financial crisis indicates a declining or slight recovery trend in GDP, the size of the banking industry and fiscal revenue, money supply, unemployment rate, fiscal deficit and the outstanding government debt remain at a high level. Adopting the extreme measure of continuous issuance of currency in the context of unconventional use of monetary and fiscal policies to save its economy indicates that the credit crisis in the U.S. financial field is evolving into a national crisis. The root cause is that something is wrong with the economic development model adopted by the United States. The consequent imbalance in the national economic structure requires the government to adjust its economic strategy in order to realize a new balance and create a new economic architecture for economic recovery. Therefore, Dagong analyzes and judges the prospects of the U.S. economy from the following aspects:
First, the motivational force of the U.S. economic growth is credit expansion and at present the huge debt is the result of long-term accumulation of credit expansion. Gone are the basic conditions that the economic recovery is realized through repeated use of credit expansion. Therefore, it is impossible for the U.S. economy to generate a driving force for healthy development unless it can return to the real economy and discover new areas of value creation. As of the end of 2009, the total debt, including that of the U.S. government, enterprises and household, amounted to 52.3 trillion U.S. dollars, while the GDP was just 14.3 trillion U.S. dollars in the same period. Without a massive increase in the real value of domestic production, it is impossible for the United States to acquire the capability of paying off its stock debt by relying solely on its current capability of value creation. Therefore, the U.S. economy would be bound to sink even deeper into the mire if it continues to rely on the credit expansion model of economic development.
Second, the U.S. capability of creating real wealth can not support its huge consumption. Under the current circumstance it is difficult to increase the speed of wealth growth; the only correct way out of debt reduction is mitigation of expenditure. Since the U.S. government will not adjust its national strategy, it is inevitable for the United States to increase debt or transfer debt by depreciating the U.S. dollar. The inevitability of such a move makes the dominant factor in the lasting stagnancy of the U.S. economy. In the components of the U.S. GDP in 2009, the financial services sector accounted for 21.4% while the real economy sector accounted for 65%.The total output value of the U.S. financial services industry is composed of two major parts: one is the transferred production value, most of which comes from value distribution of participating in international production. Another part is the inflated value originated from credit innovation, which belongs to bubble value. In addition, due to the high economic financialization, more than half of the profits in the real economy come from the returns of financial activities. If we exclude the factor of virtual economy, the U.S. actual GDP is about 5 trillion U.S. dollars in 2009, per capita GDP about $ 15,000. Meanwhile, the total domestic consumption was 10.0 trillion U.S. dollars and government expenditure was 4.5 trillion U.S. dollars. The production capacity of real value in the national economy is the material base to arrange social distribution and consumption. As the U.S. government arranges its budget according to the GDP including the virtual value, its revenue must fall short of its expenditure, so the socialization and normalization of debts will exacerbate the environment of economic development. It is predicted that the average real GDP per year of the United States will not reach 6 trillion U.S. dollar and per capita GDP will be less than 20,000 in the coming 3-5 years.
Third, the international division of labor and the import and export policies will make it difficult for the United States to realize balance of international payment. Based on the U.S. industrial structure, exports are mainly comprised of high-tech products, but the U.S. limits the export of technical products for strategic reasons; however, what the U.S. needs the most are daily necessities and energy, etc. In this case, imports are rigid, while exports are elastic. On the one hand, American products are not essential items for many countries; on the other hand, due to the policy restraint, it is difficult to effectively raise the export volume, all of these causes the U.S. to have long-term structural trade deficit. Ever since 1983, the current account deficit of the United States has been increasing by an average of 20% year on year. Even if considering the stimulation effect of U.S. dollar depreciation to export, the current account deficit is expected to maintain 4% of GDP for the next 3-5 years. The U.S. dollars outflow through current account deficit flows back to the United States through the capital account and financial projects, which supports its financial system to realize the transfer of international production value to the U.S. The U.S. imbalance of trade becomes an international wealth plundering system by exchanging domestic necessities with the export of the U.S. dollars. It is the barometer to measure whether the U.S. has the creative capability of actual value.
Fourth, it is difficult for the renewable energy development strategy to become the new focus of economic growth. The renewable energy development strategy proposed by the Obama administration is beneficial to inspiring people’s confidence in economic recovery, but it is still impossible to become an effective power to reverse the American economic development situation in a moderately long time, because the U.S. lacks the strategic investment capability that would make renewable energy an industry to transform the national economy. In addition, it is confronted with the formidable competition from Northern Europe in terms of the new energy technologies. Therefore, this strategy will exert very weak influence on changing the American economic structure and development model within a long period of time.
In general, it is difficult for the current economic structure used in U.S. economic development model to create sufficient material base to support its domestic consumption. Virtual economy gives tremendous impact on the safety of the national economic system.
The reform of the development model of the national economy forms the decisive factor to stop the economic recession and to realize the sustained development of the national economy in the post-crisis era.
III. Continuous economic downturn leads to increasing risks in the financial system and the trend of the U.S. dollar depreciation will cripple the value transfer capability of the financial system to attract dollar capital reflow.
After the crisis, the stability of the American financial system has not improved fundamentally; rather, it will face increasingly more serious rising trend of risks. After the financial crisis broke out in 2008, the large scale bailout program of the Federal Reserve and the U.S. government temporarily stabilized the financial system; the too-big-to-fail financial institutions benefited a lot. However, there are still toxic assets such as the huge financial derivatives hidden in the financial system waiting for effective disposal, and the future deleveraging process will take time. In addition, the long term high unemployment rate caused a rise in loan defaults. By the end of Q2 2010, the default rate of bank loans in the United States has achieved 7.32%, increasing for 17 consecutive quarters, in which the default rate in the housing loans has increased to 11.4%. Since the government withdrew the housing stimulus measures in April 2010, the real estate market has been in recession and the problem of foreclosure tends to become serious. It is estimated that the banks will face the repurchase pressure of nearly 220 billion U.S. dollars worth of real estate mortgage bond, which cannot be satisfied by the current provision for repurchase.
On the basis of 140 cases of bank failure in 2009, another 86 banks went bankrupt in the first half of 2010 and the current number of troubled banks has reached nearly 500. The end of 2010 is likely to witness a new rise in bankruptcy for small and medium-sized banks in the U.S.
The U.S. monetary policy used in dealing with the crisis has almost lost its effect in promoting economic growth. As a new economic driving force has not formed in the United States, the declining intention of individual consumption and corporate investment leads to the shrinking of monetary demand. Although the continuous loose monetary policy of the Federal Reserve has largely increased the basic monetary supply, it has failed to promote the expansion of domestic credit scale. The insufficient credit demand of real economy combined with the bank’s mood of reluctant lending during the period of economic downturn due to asymmetry of credit risk information, has resulted in the decreasing credit scale in the United States. Following the 10.3% decline in the amount of commercial bank credit and leasing in 2009, another 7.2% decline happened in the first three quarters in 2010 on a year-on -year basis. The large amount of liquidity accumulated within the financial system is mainly used for speculative financial transactions and flowing into foreign markets, which is neither conducive to promoting the development of real economy nor helpful for improving the chronic overexpansion of virtual economy.
The Federal Reserve’s monetary policy of continuous quantitative easing has temporarily reduced the long-term debt interest rate, but the consequent dollar depreciation trend will trigger the financial system’s long-term recession. The monetary policy of a new round of quantitative easing launched by the Federal Reserve on November 3, 2010 plans to release another 600 billion U.S. dollars of long-term U.S. treasury bond by the end of June next year. The direct objective of this policy is tomaintain the current low yield of the Treasury. The continuous U.S. economic downturnand the government’s increasing debt burden have undermined the foreign investors’ confidence in the Treasury. These investors turn to buy gold to avoid risk, which pushesup the price of gold and increases the pressure of a rise in long-term interest rate.
Especially for a highly-indebted economy as the United States, a large amount of financial derivative contracts in the financial system is related with the interest rate; the increase of long-term interest rates will cause another big fluctuation in the financial system, restrict the economic recovery, and increase the government’s burden of debt service. The Federal Reserve’s monetary policy can temporarily decrease the long-term interest rate, but it can also trigger the dollar’s depreciation and reduce the attraction of dollar-denominated assets to foreign investors. From June, 2010 until now, the U.S. dollar index has dropped about 6% and has depreciated 15% relative to the Euro, 11% relative to the Sterling Pound, 13% relative to the Yen, 18.5% relative to the Australian dollar, 11.4% relative to the Korean Won. The dollar’s continuous depreciation will cripple the value transfer capability of the U.S. financial system to attract the dollar capital to reflow, and the status of the U.S. as the global financial center is on the decline. Therefore, the room for implementing of monetary policy in the United States is increasingly being squeezed. On the one hand, the long-standing quantitative easing policy will only play a temporary role in decreasing interest rate, as a consequence the dollar depreciation is not conducive to the financing requirement of the United States as the largest debtor country and the interest assertion of the creditor will be the potential pressure to the increasing interest rate. On the other hand, the long-term economic downtown makes it impossible for the government to increase interest rate and regain a strong dollar policy. In this dilemma, any policies chosen by the Federal Reserve will hurt itself. Though it is likely for the current loose monetary policy to postpone the occurrence of the difficulties, yet in the long run, it will be proven to be a practice resembling drinking poison to quench thirst.
IV. New round of liquidity injection can not substantially reverse the trend of increasing the federal government’s fiscal deficit and debt burden in the long term.
The U.S. Monetary Authority launched the monetary policy of a new round of quantitative easing, announcing the release of a large amount of federal government Treasury bond continuously. However, it only has a limited positive influence for easing the current embarrassed fiscal conditions of the federal government. In 2009, the U.S. increased another 1 trillion U.S. dollars fiscal deficit in response to the financial crisis, making the ratio of year-end fiscal deficit to GDP a record 10.6%, and consequently led to more difficult fiscal operation for the government. Under these circumstances, the Federal Reserve took the measure of direct debt monetization, on the one hand, financing for the federal government’s fiscal deficit, and on the other hand, keeping the U.S. Treasury interest rate at a low level. The federal government’s financing cost and interest burden, therefore, are both controlled at relatively favorable levels.
Additionally, further depreciation of the U.S. dollar is inevitable due to the liquidity increased by the monetary policy of a new round of quantitative easing, and the U.S. government’s current debt burden, to some extent, is expected to be released. By the end of 2009, the balance of the U.S. government’s outstanding debts reached 12.3 trillion U.S. dollars, of which over 7.8 trillion U.S. dollars debts were held by the public including foreign investors. This is to say, if the U.S. dollar depreciates by 1%, the actual decrease of government’s debt burden will exceed 123 billion U.S. dollars, about 5.5% of its fiscal revenue in 2009. The U.S. base currency will be supplied with an increase of 30% on the existing basis in the coming eight months, therefore, in full consideration of such factors as economic recession and slowdown of currency circulation caused by shrinkage of private credit, a conservative estimate would be U.S. domestic inflation increase of about 1.5 percentage points and U.S. exchange rate index down approximately 10% before Q2 2011. As a result, federal debts will actually be reduced by over 250 billion U.S. dollars.
Public creditors’ interests are invisibly eroded due to the depreciation of U.S. dollar; especially the foreign creditors will suffer even greater losses from fluctuation of U.S. dollar exchange rate. Although the federal government could ease its actual debt burden to some extent via this channel, its sovereign credit will be adversely affected as it ignores the responsibilities of credit contracts and the legitimate rights and interests of creditors.
For a long time, the U.S. authority has not been temperate in its government credit expansion, resulting in large fiscal deficit and increasingly high government debts in consecutive years. Under current governance framework in the U.S., rigid expenditure accounted for a larger proportion of the fiscal expenditure to satisfy its global hegemonic strategy, which, on one side, increased the difficulty for the U.S. federal government to optimize its fiscal expenditure structure and control deficit growth, while, on the other side, made the federal government unable to have sufficient operating space in smoothing economic periodic fluctuation by fiscal policy instruments so that sustainable and steady economic growth cannot be guaranteed. After the breakout of the global financial crisis, the weak economic growth in the U.S., increase of the fiscal expenditure and the launch of the monetary policy of a new round of quantitative easing will all drive the U.S. debt burden to increase further. The pattern that the U.S. government has of a high fiscal deficit and heavy debt burden is essentially because of its terribly-flawed development model of debt economy, which can not be significantly improved by simply increasing channels for issuance of the U.S. dollar. Dagong predicts that the U.S. fiscal deficit will remain moderately high in 2010 and 2011, about 10.8% and 8% of the year’s GDP respectively. The federal debts will also increase in 2010 and 2011 on the basis of 2009, and the ratio to the year’s GDP will be as high as 95% and 97% respectively.
V. In essence the depreciation of the U.S. dollar adopted by the U.S. government indicates that its solvency is on the brink of collapse, therefore it wants to cut its debt through the act of devaluation with the national will; such a move has severely harmed the interests of creditors. The whole world, consequently, will have to face a period of dramatic adjustment of interest pattern.
The status of the U.S. dollar as the dominant international reserve currency determines that its depreciation gives an inevitable impact to the interests of all creditors.
In addition to the shrinking of creditors’ assets, the utter chaos in the international currency system triggered by the depreciation of the U.S. dollar will definitely damage the interests of all the creditors in the world at various levels. Together with the possibility of inflation in the future, the wealth of creditors will be plundered once again by the malicious act of currency devaluation conducted by the U.S. government after it suffered the losses during the financial crisis since 2007.
The value fluctuation of the world’s major currencies caused by the continuous devaluation of the U.S. dollar will push the adjustment in world interest pattern through the value comparison of the monetary system. The essence is to transfer the interests of the creditors to the debtor free of charge, and that will fundamentally destroy the international credit system and global economic system comprised of the creditor system and debtor system, resulting in an overall crisis around the world.
Outlook
Dagong believes that the occurrence and development process of the credit crisis in the U.S. resulted from the long-standing accumulation of the contradictions in its economic system; the U.S. debt burden can be relieved only to a certain extent through large-scale printing and issuance of the U.S. dollar; however the consequent decline of the U.S. dollar status and national credit will block the debt revenue channel which is vital to the existence of the United States to a greater extent. The potential overall crisis in the world resulting from the U.S. dollar depreciation will increase the uncertainty of the U.S. economic recovery. Under the circumstances that none of the economic factors influencing the U.S. economy has turned better explicitly it is possible that the U.S. will continue to expand the use of its loose monetary policy, damaging the interests the creditors. Therefore, given the current situation, the United States may face much unpredictable risks in solvency in the coming one to two years. Accordingly, Dagong assigns negative outlook on both local and foreign currency sovereign credit ratings of the United States.
posted by NewsChecker | 9:28 AM
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