This page has been archived and commenting is disabled.
S & P: America Could Default Even if Debt Ceiling is Raised
As I noted yesterday, America could default even if the debt ceiling is raised.
One of the big, government-sponsored American rating agencies has just confirmed my post.
Specifically, Standard & Poor's announced today:
[We're
putting U.S. debt on] CreditWatch with negative implications ... owing
to the dynamics of the political debate on the debt ceiling, there is
at least a one-in-two likelihood that we could lower the long-term
rating on the U.S. within the next 90 days ....
The political
debate about the U.S.’ fiscal stance and the related issue of the U.S.
government debt ceiling has, in our view, only become more entangled.
***
We
may lower the long-term rating on the U.S. by one or more notches into
the 'AA' category in the next three months, if we conclude that
Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.
The Washington Post adds:
S&P
managing director John Chambers said in an interview ... even if the
parties agree to raise the debt ceiling, it may not be enough to avert a
downgrade. Chambers said the country must implement a plan to reduce
the annual budget deficit by roughly $4 trillion over 10 years, which makes the debt manageable over the long term.
The
White House and Congress have discussed a plan that big, but
negotiations have more recently centered on a smaller deal, at $2
trillion or less.
“That could still lead to a downgrade,” Chambers said.
Knee-jerk conservatives may say, "yes, we have to slash all social support programs like unemployment benefits and food stamps".
Knee-jerk liberals might say "raise taxes instead of cutting any spending".
But the truth is that plugging the major holes in our economy is more important than either cutting spending or raising taxes.
And
curtailing bailouts and giveaways for the top .1% of the richest elite
(which weaken rather than strengthen the economy, as shown here, here and here) and slashing spending on unnecessary imperial wars which (which reduce rather than increase our national security, as demonstrated here and here) would get us most of the way there.
As I wrote last year:
Why aren't our government "leaders" talking about slashing the military-industrial complex, which is ruining our economy with unnecessary imperial adventures?
And why aren't any of our leaders talking about stopping the permanent bailouts for the financial giants who got us into this mess? And see this.
And why aren't they taking away the power to create credit from the private banking giants - which is costing our economy trillions of dollars (and is leading to a decrease in loans to the little guy) - and give it back to the states?
If we did these things, we wouldn't have to raise taxes or cut core services to the American people.
I pointed out the next month:
If
there's any shortfall, all we have to do is claw back the ill-gotten
gains from the fraudsters working for the too big to fails whose
unlawful actions got us into this mess in the first place. See this, this, this, this and this.
- advertisements -
America has been in constructive default for decades. Borrowing to pay off maturing debt is defacto default if not dejure default.
But no, there won't be any disruption of government checks. They'll find the money one way or another. If not QE then some other way.
Going after 401ks and other pension assets would be their next move IMO. I can't imagine them resisting the urge to go after all those trillions. It's just too temping.
And thanks for posting a relevant article GW. Maybe there's hope for you.
GW asks a lot of rhetorical questions about our political leaders.
Our politicians are in the pocket of, beholden to, smitten with, and constrained by the financial elite and the corporations headed by that elite.
Modern capitalism is debt-driven. Debt fuels and necessitates expansion. Credit provides for militarism. Conquest of markets and resources is required for expansion.
There is an interesting article on this topic today at the 321gold website:
"Debt-based money issued from central banks on which interest accrues is the basis of capitalist economies.
It is the charging of interest on money issued as loans from a central bank that is the foundation of capitalism...
The Austrian school of economics emerged at a time when communism and socialism were offered as alternatives to the capitalist model. Because of the central role of government inherent in communist and socialist models, the potential for tyranny was obvious...
That capitalism, however, offered the same potential is less obvious. The threat of capitalism to human freedom is even more insidious because of its covert agenda and global presence … "
http://www.321gold.com/editorials/schoon/schoon071411.html
I agree with the notion of reducing spending on these godforsaken wars, but for the folks out there that are so concerned about lower spending elsewhere resulting in lower GDP, you get the same result if you cut defense spending (think Northrup, Lockheed, General Dynamics, etc.).
I don't have a problem with the resulting lower GDP from cutting gov't spending, but it seems an odd ommission for people to complain that lower spending on government jobs and entitlements leading to lower GDP (true) while not mentioning that fact when talking about less defense spending.
"U.S. federal debt could potentially be downgraded to junk status by 2030 if the government does not significantly reform entitlement spending, according to a study by Standard & Poor’s"
Bitch about bankstas all you want, but the elephants in the living room are Medicare, Medicaid and Social Security, as S&P just noticed.
go george go!!!
GW,
Have you apologized to the families of 9/11for $hitting all over them yet? You WANT the US to collapse plain and simple.
Ron Paul: America's AAA Rating Not Worth Saving Because "We Are Insolvent"
US gov't default is coming. The question is whether it is now or later. End of argument.
The US defaulted on its citizens when it caved to the bankers in 08.
The name of the country should be changed from the United States of America to INTERNATIONAL BANKERS INC., US DIVISION.
The country is toast.
The only thing left to be done is destroy the currency and take all that is left from its destitute, bewildered citizens.
What's interesting is the Moody's announcement caused shockwaves, whereas S&P has been met with a shrug, as they are perceived to me merely following. However, S&P has a much graver message. They make it clear that it's not the debt ceiling, it's the deficit that matters. We know they will raise the ceiling and are going to jawbone about promises in the future, which will get constantly delayed owing to the fragility of the 'recovery', which means no cuts until after the election, when there's always an election.
Washington is incapable of making the brave choices, frankly, incapable of seeing the reality, but then when you have a phony economy, phony GDP, an insolvent banking sector and a need to fund the most expensive military in history, reality cannot be allowed to intrude and so they will continue to print, like all empires before them.
As an aside, I can't help feeling the ratings agencies are acting like their days are numbered. I suspect that the governments are going to decide their debt should be ratings exempt in the very near future.
the military bitches have always been in control. They are spread all over the globe and are in serious risk of loosing their grip. Like grabbing a tiger by the tail. You had better hang on because if you slip up you will be lunch.
The bitches are making lots of US dollars but want and need more or they will loose their grip.
They have pissed off a lot of people and now are looking to go home for supper and leave the play ground. That is easier said than done. The tiger is pissed.
They need to turn these military campaigns into profit makers for the country and not just the likes of Blackwater and Chaney. US citizens can only cough up so much cash, if any, as most of them are already under water. You might say the government is under "Blackwater".
"They need to turn these military campaigns into profit makers for the country."
Are you seriously suggesting that we chain our boys in uniform to a profit and loss statement? Freedom is priceless, citizen. We'll bear any cost!!!
LOL.
Freedom is priceless, citizen. We'll bear any cost!!!
Hopefully you said that in jest. Surely you don't believe Iraq, Afghanistan, etc, are preserving American freedom.
I think he means we should try to make the TAXPAYERS some money out of the wars...and not JUST the corporations.
The Swissie are smart, and probably strong enough to ward off the dying empire, but they should reckon with an all out assault by Inaction Jackson Holder and his successor. Can Swiss neutralitywithstand another 100 years? Can it withstand the final blow to neoclassical funny numbers?
The holders of gold will set the next era's monetary laws. The will be written in shiny stone, and recognized the world over. So, do he Swiss have enough to back their fiat?
The Swissies are simple, not smart. It has pros and cons.
If they were smart they would kick out both followers of the Squid they have in-house, Credit Suisse and UBS.
Meanwhile there is some gold to back the Swissie, gold backing only stopped a decade ago.
Now some right-wing MPs want to propose a new "Gold Swiss Franc" in Parliament next September.
Who knows what will come out of this...
Something funny from Europe:
The Swiss, poor little simple souls, enshrined in law that every federal budget presented has to be balanced with the last six, which mean that if you overspend in let's say 2002 you have to balance this until 2009.
One little law, less then one page. Since it targets the preparation and presentation of the budget (usually a task/duty of the executive), it catches the issue at the root...
Laws? LOL. This is America where the constitution no longer matters. Not gonna let a bunch of laws get in our way, are we?
The US success has been since inception based on a selective application of laws (US rule of laws)
It is nothing new. The US has not changed one bit since its start. No longer is irrelevant.
As much as it pains me to admit, I agree with S&P:
- the US debt ceiling is not the issue (as it wasn't at time when Reagan raised it to one trillion USD)
- the issue is the permanent huge deficit.
You can't expect to have solid finances if you consistently overspend " 'till Kingdom come".
As a rant-treat: Poor Chairman Ben Bernanke could not print without overspending!
Clinton, for all his faults, just cooked the books so that it looked like a surplus. Compared to now, it was balanced.
Washington, can you promise a few years of surplus in our times?
So they're actually waiting for US to default before they bring its credit rating down one notch.
Banksta Bitchez