Monday, August 08, 2011

There's just one thing I want to say about S&P's bond-rating downgrade -- then I'll turn the floor over to Andy Borowitz and Ian Welsh


Treasury Secretary Timothy Geithner, explaining his decision to hold onto his current post: “I didn’t want to look for a job -- it’s fucking scary out there.” (See "Bonus Andy" below.)


Predator Drone Seen Hovering over Standard & Poor’s Headquarters
Company Could Be in for Downgrade of its Own, Experts Say

WASHINGTON (The Borowitz Report) -– Just days after downgrading the credit rating of the United States, Standard & Poor’s was on high alert this morning after an unmanned Predator drone was seen hovering over its headquarters in lower Manhattan.

While the mission of the Predator was unclear, some insiders speculated that S & P might be in for a downgrade of its own.

The Predator appeared in the skies above the company's headquarters minutes after it was rumored that S & P was about to downgrade the United States to the same status as Pluto.

As a so-called "dwarf nation," the U.S. would no longer be accorded the same respect as a recognized country like France or Brazil, one S & P source said: "Basically, the United States would be considered a social network with parking."

At the White House, President Obama offered no comment on the Predator’s mission, saying only, “The Predator is an effective weapon against the enemies of the United States of America.”

He did offer apologies for what he called “an accidental Predator missile strike” over the weekend at a golf course in Virginia which narrowly missed Rep. Eric Cantor (R-VA).

by Ken

So, on the first day of trading after the Standard & Poors U.S. bond downgrade, "Stock market plummets after historic downgrade of U.S. credit rating" -- a 5.6 percent drop, Wall Street's "worst day of trading since the 2008 financial crisis as investors reacted to the historic downgrade of U.S. credit by selling so heavy that it wiped out $1.2 trillion of stock market wealth Monday."

There are a number of things that could be said about the bond downgrade, most of them silly -- and there's been no shortage of people saying them. I have just one point to make. For how long now has the Tools of the Oligarchy Right been warning that all sorts of catastrophic mayhem will result from our catastrophic debt catastrophe, including the collapse of the financial markets. The chief threat always has been that the bond market will punish us for our fiscal recklessness. And for how long have people like Paul Krugman been pointing out that bond interest rates showed no sign of going up, that apparently the dreaded bond market had no shortage of confidence in the U.S.'s financial stability. Bond buyers were only too happy to buy all the treasuries put on sale, at historically low interest rates.

This has to have driven the Pete Peterson Doom Via Debt prognosticators absolutely batty. Here they were trying to scare the bejeezus out of us with their phony-baloney "crisis," and the damned bond buyers were too dense to provide the chills the plutocrats' doom scenario called for.

Well, glory be, the bond buyers have suddenly had their confidence shaken, and bond interest rates will go up -- meaning that the bond-buying oligarchs not only have the "crisis of confidence" they've been threatening, but some nice new profits too!

Now here's Ian Welsh's take:
Comments on the S&P Downgrade

by Ian Welsh

Aside from hysterical laughter, here are the key points:

1. Obviously the US isn’t even close to insolvent. The gold in Fort Knox is held on the books at $37/ounce, for example. Most Federal lands are held on the books at 19th century valuations. Not to mention that the US’s debt is denominated in its own currency, which means it could simply be printed, and that the US government has a lot of unused room to tax, should it ever deign to use that on people with money, as opposed to those without.

2. As everyone is pointing out, the idea that S&P, who rated all the subprime trash as AAA, has any credibility, is a joke.

3. However, Obama and Democrats refused to destroy S&P when they had the opportunity and every reason to do so. The submprime crisis could not have been nearly as bad without S&P and the other rating’s agencies rating trash AAA so that investors who must buy AAA by law could do so. To put it simply, S&P engaged in systematic fraud. They, like everyone on Wall Street and in the major banks, have not been indicted for this. The choice to not indict is policy. Obama’s policy.

4. If Obama did not want this to happen, it would not happen. Could you imagine what LBJ, Nixon or Truman (or, hell, Bush Jr.) would have done if a rating’s agency tried this? The President has the necessary tools to utterly destroy S&P and every senior analyst working for them. You could use terrorism statutes or RICO, just as two examples. Send the FBI into their offices, seize all the assets of both the company and everyone working for it, and then got through their records. I guarantee, as absolutely as the sun will rise tomorrow morning, that there is enough evidence of fraud in those records to put them away for life. In the meantime, RICO laws are used to seize all the assets of everyone involved, meaning they will be using public defenders (don’t like a bad law? Use it against real people.) When S&P informed the White House they were going to downgrade, the White House could have quietly let them know what the consequences would be.

5. The US has effectively unlimited drawing rights from the IMF. Those drawing rights mean that if any of the core economies have an AAA rating, in effect, so does the US. (ie. if Germany is AAA, so is America.)

6. S&P knows all this. They are doing this because they know the President and Congress and the real people in the oligarchy want it done. Remember, a downgrade increases rates, and that is a direct increase to their income. And they know the US can pay, they aren’t fooled by idiotic talk about a default. The US may default at some point, but that will be a political decision.

7. This is another manufactured crisis, on top of the original manufactured debt ceiling crisis. The oligarchy wants the opportunity to buy federal assets at dimes on the dollar. They believe they don’t need the poor or middle class anymore, so they are good with getting rid of SS and Medicare. And Obama is, as he always has been, onside with this.

These people, are, however, playing with fire. Just because it’s a crisis that didn’t have to happen, a crisis, that is manufactured as another looting opportunity, doesn’t mean that it won’t have real consequences.


In today's outing, I would say that the "other" jokes appended to the Borowitz Report are actually funnier than the report.
In other financial news:

-- In an effort to find a safe haven, rattled investors fled the dollar today and moved their money into Groupons.

-- In one rare bright spot on Wall Street, manufacturers of red ink posted record profits.

-- And finally, Secretary of the Treasury Timothy Geithner explained his decision to remain at the U.S. Treasury: “I didn’t want to look for a job – it’s fucking scary out there.”

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