Chinese Agency Blasts Fed for "Eroding Ligitimacy of the Global Monetary System": U.S. Vulnerable

The Beijing-based Dagong Global Credit Rating says that the quantitative easing policies by the U.S. Federal Reserve has "eroded the legitimacy of the global monetary system that takes the dollar as the key reserve currency."

In addition, the policies are bringing the U.S. dollar's credit-worthiness to a vulnerable position.

While Japan was cut by S&P yesterday, the Chinese agency downgraded the U.S. sovereign credit rating last November, after the Fed announced it's QE2.

China has been on a campaign to move away fro te U.S. dollar as reserve currency. China's $2.85 trillion foreign exchange reserves are mainly denominated in U.S. dollars, and Chinese Premier Wen Jiabao has publicly expressed concerns of the assets.

President Hu Jintao said at G20 summit at Seoul that China wanted an international reserve currency system with stable value, rule-based issuance and manageable supply.

U.S. Wants Creditor Haircut

Says Reuters: "But Dagong said in the English-language report that the United States is trying to "haircut" its creditors by permitting a weakening currency".

"The behavior that the United States ignores international creditors' legitimate interests indicates a dramatic decline of the country's willingness to repay the debt,"
It added that the capital flows into emerging economics stemmed from cheap dollar is "a destructive factor to the healthy economic development in different countries."