Today’s post reacts to the news today that Standard & Poor’s (S&P) have finally fallen in line with the other members of the rating oligopoly (Moody’s and Fitch) in downgrading China’s sovereign debt rating to A+, which puts it one category below the U.S. The reason for this, according to S&P, is that the growing credit bubble in China is systematically reducing financial stability in the country, which seems to confirm fears that recent moves by the Chinese Government to limit the growth of that particular bubble have not taken hold. However, with the BRICS nations calling for the development of their own major rating agency, the news that some analysts suggest that things are moving in the right direction in China despite the recent downgrade may accelerate the plans of the BRICS nations so that the pace of agency development falls in line with the wishes of the Indian Prime Minister who recently made loud calls for an acceleration in that regard. In this post, then, ...

On quite a few occasions here in Financial Regulation Matters we have focused on the growing credit bubble and its potential effects when it collapses. In today’s post, we are going to continue this assessment by looking specifically at the situation in the United States, which will encompass an array of reports and studies that discuss an ever-growing problem that is beginning to set records. As we often do in Financial Regulation Matters , we will position this discussion within a much wider context and discuss how the proximity of this bubble to the last Crisis is particularly worrying, but also we will look at how impotent the system is at actually constraining it, with the result being methodologies that are moving into absurd territories. We have discussed the rising credit problem on a number of occasions before, but mostly in terms of the warnings posed by British regulators . However, looking at the global picture reveals a much more dangerous situation in that the wo...