Policy makers will have to be both economically and politically cornered before another official QE(n) program is adopted, but another is inevitable. The public might talk austerity, but they will scream for help by any means as the sovereign debt crisis worsens not only in Europe but also the United States.

Headline: China’s Dagong May Cut U.S. Credit Rating Again If It Adopts QE3 Program

China’s Dagong Global Credit Rating Co. may cut the U.S.’s sovereign rating for the second time since August if the world’s biggest economy conducts more large- scale asset purchases.

Dagong, based in Beijing, lowered the U.S. sovereign rating one level to A on Aug. 3, on par with Russia and South Africa, after saying America’s decision to raise the debt ceiling will precipitate a national crisis. Investors have been speculating the U.S. will conduct a third-round of quantitative easing, or QE3, to boost an economy hurt by job losses.

“If the U.S. adopts more quantitative easing policies, we may downgrade or put it on the negative watch list,” Zhang Jun, general manager of Dagong’s marketing division, said by phone today. “We are closely monitoring it.” Guan Jianzhong, Dagong’s chairman, made similar comments in an interview with Al Jazeera television, Zhang confirmed. The Guardian newspaper reported Guan’s comments today.

The U.S. central bank purchased $2.3 trillion of debt to spur the economy in two earlier rounds of quantitative easing. Federal Reserve Vice Chairman Janet Yellen said Oct. 21 a third round might become warranted if necessary to boost a U.S. economy challenged by unemployment and financial turmoil.

http://edegrootinsights.blogspot.com/2011/11/chinas-dagong-may-cut-us-credit-rating.html

bloomberg.com