Moody's and the Fossilization of America
Moodys is threatening to review America's AAA credit rating. The Administration and their lackeys in the media are claiming Moody's is backing their demand for an increase in the credit rating, but...
http://www.theatlantic.com/business/archive/2011/06/did-moodys-just-side-with-republicans-on-the-debt-ceiling-battle/239848/
From the article in The Atlantic:
"Add Moody's to the list of rating agencies concerned over Washington's failure to reconcile its taxing and spending. We already saw Standard and Poor's making the first move towards downgrading the U.S.'s AAA-rating in April, when it revised its outlook for the nation's debt to negative. Today, Steven Hess, senior credit officer at Moody's, says that if a debt ceiling agreement isn't reached by mid-July, the U.S. could be put on review for downgrade. In his comments, however, he appears to validate the current debt ceiling battle as a good time to make a long-term deficit deal.
In an interview, John Detrixhe from Bloomberg reports Hess saying:
The negotiations now on deficit reduction over the medium term are a significant opportunity to actually do something on that front. Although fundamentally, the debt limit question is separate from long-term deficit reduction, they seem to be linked at this point in Washington.
The chances of them coming to an agreement, we think, are much reduced if this opportunity goes by and nothing happens.
This must infuriate Democrats. For months they have been complaining that the debt ceiling debate is a ruse on the part of Republicans to create an issue out of a procedural necessity. Now, however, it looks like one of the rating agencies is siding with Republicans. Hess here essentially says that if legislation raising the debt ceiling doesn't include a plan for long-term deficit reduction, then the firm will view Washington's inaction as a problem.
Just to be clear, Hess doesn't think that raising the debt ceiling should have necessarily been connected to broader deficit reduction. But he says that in this case, it's pretty clear that the two are married, for better or for worse. Republicans may have created this new frame-of-reference, but that's now the only lens through which Congress can view the world."
End excerpt.
Well, well, well!
The conventional wisdom is that Moody's was bitch-slapping the GOP over an obstinate refusal to raise the debt ceiling, to enable more borrowing and spending. This, the Administration and Congressional Democrats have argued, could cause a default; we have to borrow more to spend more to borrow still more. Yet the people at Moody's seem to be saying something quite different.
The concept that we have to raise the debt ceiling to avoid default is comparable to the idea that we have to take out a new, high interest credit card to pay off our current debts - debts incurred at lower rates. No individual, family, or business could possibly operate in that fashion for long; interest will kill them. Now, people HAVE borrowed to pay off debt, but it is always the last resort, and is done in conjunction with cuts in spending. Generally you stop spending first, then when the bills still do not add up you borrow. But you borrow at the best terms, and you have a plan to pay that debt. America isn't doing that; we are borrowing so we may continue the elevated spending of the last two years. We aren't payng down a thing. It is madness to raise the debt ceiling with no intention of cutting spending.
But, one must suspect the Democrats aren't mad, so they must have a plan. I suspect I know what that plan entails; QE3, for starters. We are going to pay this debt with money printed entirely for the purpose of paying off debt. It's the Weimar solution; get out of debt by making your currency worthless. In the process, the public suffers, and the Democrats figure they'll pick up a lot of votes that way, as the public demands relief from the government. It has worked in the past, both here and overseas.
And, of course, the real hard-core on the Left have fantasized about such a thing for a long time; crash the U.S. in the Cloward-Piven fashion. With the American economy in ruins the nation will be ripe for political restructuring, for instituting that utopia of the liberal dreams.
The Democrats have to know that this nation will collapse if nothing is done. They are, in my view, the lowest of traitors. They are willing to impose terrible suffering and deprivation on the entire nation for the political power. It is beyond despicable.
At any rate, Moody's is sending a message, only that message is to the White House and Senate; make a deal or face the wheel (with apologies to Mad Max, but then, we may be in Thunderdome territory if this is allowed to slide). Moody's doesn't want to downgrade the U.S. but will have no choice if spending isn't reined in. NOT that more borrowing is needed; the problem is on the spending side of the equation.
Keynsian economic stimulus has been proven again and again to be a failure. Japan had ten stimulus packaged during the 1990's, and is today considered a waning power; she destroyed herself through Keynes. During the '80's Japan was thought to be the future world power, and solely based on her economic dynamism, a dynamism born of Supply Side economics. The Japanese were seduced by the same lie that crushed Britain earlier and is now crushing America; that government spending can generate prosperity. It can't; nobody ever spent their way to riches. Governments cannot allocate resources in a way that is sensible and optimal; only the invisible hand of the market can do that. But human nature being what it is, Man cannot stand the idea that some things are simply not under his control, and the economy is one such. There is no way to guarantee prosperity, particularly when such a large and corrupt entity as government is involved. it should be remembered that the principle purpose of government is, as the Bible says, to hold the sword to punish evildoers - it exists to exercise physical power to protect the freedom and security of the citizenry. It was never intended to make life fair, or to see that people prosper. It cannot do that, because it can do nothing but take from one to give to another, and in America the one who has has usually earned it and the one who has not has often not done anything to earn. By intervening, government twists and distorts the whole system, disincentivizing those who would produce as well as those who loaf. In the end, nobody has any reason to serve his fellow man, and the system slows to a crawl. It's like a fly in amber; it freezes into a fossil.
And fossilization is where the U.S. is headed if we do not act, and act now.
http://www.theatlantic.com/business/archive/2011/06/did-moodys-just-side-with-republicans-on-the-debt-ceiling-battle/239848/
From the article in The Atlantic:
"Add Moody's to the list of rating agencies concerned over Washington's failure to reconcile its taxing and spending. We already saw Standard and Poor's making the first move towards downgrading the U.S.'s AAA-rating in April, when it revised its outlook for the nation's debt to negative. Today, Steven Hess, senior credit officer at Moody's, says that if a debt ceiling agreement isn't reached by mid-July, the U.S. could be put on review for downgrade. In his comments, however, he appears to validate the current debt ceiling battle as a good time to make a long-term deficit deal.
In an interview, John Detrixhe from Bloomberg reports Hess saying:
The negotiations now on deficit reduction over the medium term are a significant opportunity to actually do something on that front. Although fundamentally, the debt limit question is separate from long-term deficit reduction, they seem to be linked at this point in Washington.
The chances of them coming to an agreement, we think, are much reduced if this opportunity goes by and nothing happens.
This must infuriate Democrats. For months they have been complaining that the debt ceiling debate is a ruse on the part of Republicans to create an issue out of a procedural necessity. Now, however, it looks like one of the rating agencies is siding with Republicans. Hess here essentially says that if legislation raising the debt ceiling doesn't include a plan for long-term deficit reduction, then the firm will view Washington's inaction as a problem.
Just to be clear, Hess doesn't think that raising the debt ceiling should have necessarily been connected to broader deficit reduction. But he says that in this case, it's pretty clear that the two are married, for better or for worse. Republicans may have created this new frame-of-reference, but that's now the only lens through which Congress can view the world."
End excerpt.
Well, well, well!
The conventional wisdom is that Moody's was bitch-slapping the GOP over an obstinate refusal to raise the debt ceiling, to enable more borrowing and spending. This, the Administration and Congressional Democrats have argued, could cause a default; we have to borrow more to spend more to borrow still more. Yet the people at Moody's seem to be saying something quite different.
The concept that we have to raise the debt ceiling to avoid default is comparable to the idea that we have to take out a new, high interest credit card to pay off our current debts - debts incurred at lower rates. No individual, family, or business could possibly operate in that fashion for long; interest will kill them. Now, people HAVE borrowed to pay off debt, but it is always the last resort, and is done in conjunction with cuts in spending. Generally you stop spending first, then when the bills still do not add up you borrow. But you borrow at the best terms, and you have a plan to pay that debt. America isn't doing that; we are borrowing so we may continue the elevated spending of the last two years. We aren't payng down a thing. It is madness to raise the debt ceiling with no intention of cutting spending.
But, one must suspect the Democrats aren't mad, so they must have a plan. I suspect I know what that plan entails; QE3, for starters. We are going to pay this debt with money printed entirely for the purpose of paying off debt. It's the Weimar solution; get out of debt by making your currency worthless. In the process, the public suffers, and the Democrats figure they'll pick up a lot of votes that way, as the public demands relief from the government. It has worked in the past, both here and overseas.
And, of course, the real hard-core on the Left have fantasized about such a thing for a long time; crash the U.S. in the Cloward-Piven fashion. With the American economy in ruins the nation will be ripe for political restructuring, for instituting that utopia of the liberal dreams.
The Democrats have to know that this nation will collapse if nothing is done. They are, in my view, the lowest of traitors. They are willing to impose terrible suffering and deprivation on the entire nation for the political power. It is beyond despicable.
At any rate, Moody's is sending a message, only that message is to the White House and Senate; make a deal or face the wheel (with apologies to Mad Max, but then, we may be in Thunderdome territory if this is allowed to slide). Moody's doesn't want to downgrade the U.S. but will have no choice if spending isn't reined in. NOT that more borrowing is needed; the problem is on the spending side of the equation.
Keynsian economic stimulus has been proven again and again to be a failure. Japan had ten stimulus packaged during the 1990's, and is today considered a waning power; she destroyed herself through Keynes. During the '80's Japan was thought to be the future world power, and solely based on her economic dynamism, a dynamism born of Supply Side economics. The Japanese were seduced by the same lie that crushed Britain earlier and is now crushing America; that government spending can generate prosperity. It can't; nobody ever spent their way to riches. Governments cannot allocate resources in a way that is sensible and optimal; only the invisible hand of the market can do that. But human nature being what it is, Man cannot stand the idea that some things are simply not under his control, and the economy is one such. There is no way to guarantee prosperity, particularly when such a large and corrupt entity as government is involved. it should be remembered that the principle purpose of government is, as the Bible says, to hold the sword to punish evildoers - it exists to exercise physical power to protect the freedom and security of the citizenry. It was never intended to make life fair, or to see that people prosper. It cannot do that, because it can do nothing but take from one to give to another, and in America the one who has has usually earned it and the one who has not has often not done anything to earn. By intervening, government twists and distorts the whole system, disincentivizing those who would produce as well as those who loaf. In the end, nobody has any reason to serve his fellow man, and the system slows to a crawl. It's like a fly in amber; it freezes into a fossil.
And fossilization is where the U.S. is headed if we do not act, and act now.
posted by Timothy Birdnow | 6:13 AM
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