China Drops US Credit Rating Ahead of G20

China’s top state-endorsed rating agency dropped the United States’ credit rating yesterday, warning that recent Fed moves, along with “serious defects in the United States' economic development and management model” were “fundamentally lowering the national solvency.” The report probably won’t have much impact on our lending capabilities, but it’s a sign of just how contentious the G20 meeting in Seoul promises to be, the New York Times reports. Many nations are irked over the Federal Reserve's decision to pump yet more money into the economy.

Germany has protested especially loudly, accusing the US of Chinese-style currency manipulation. Obama has sent a letter to G20 leaders defending the move, and calling for unity. But there's little chance of that; a debate last night on currency imbalances got so heated "we had to physically open the door," a South Korean spokesman told the Wall Street Journal. "The world is more divided than it was" at the last G20 meeting, Lawrence Summers observes, “because nations not facing the prospect of a depression have that luxury.” (More Federal Reserve stories.)