After the short White House meeting today, Congressional leaders of both parties met on Capitol Hill to work out an agreement to increase the debt limit. Earlier, House Speaker John Boehner held a conference call with his caucus, where he said he wanted a debt limit plan in place by tomorrow to avoid causing a drop in the Asian markets.
This concern about the markets has happened very suddenly. All of a sudden there’s a belief that a clean increase or a small debt deal with a minor amount of spending cuts would not be enough to avoid a downgrade. Standard and Poor’s basically forced this by saying that they would downgrade if there wasn’t a $4 trillion deficit deal in the next 90 days. The claim is that this has been caused by political leaders attaching the debt limit to a deal on reducing the deficit, and the inability to reach an agreement, the political stalemate, has led the markets to lose confidence.
But this is absolutely crazy. The market was up 2% last week. 10-year Treasuries are at 2.96%. There’s no difference between this week and last week in terms of the country’s deficit problem. This is about perception, and it doesn’t seem to even be about the perception of the actual market. It’s about the perception of someone at Standard and Poor’s. The rating agencies, which played a major role in the financial meltdown, has just up and put a gun to the head of the country and demanded austerity in the middle of a jobs crisis. Are you kidding me?
Washington certainly deserves blame for attaching a huge lift of deficit reduction to the debt limit, which is so routine but which has such adverse consequences. But this is completely irresponsible on the part of not just DC but the rating agencies. The word “collusion” comes to mind, with the elites of the world demanding that their tax cuts be paid for with someone else’s money.
On top of this, you have both the President and Harry Reid vowing never to agree to a short-term extension of the debt limit, wanting instead something that pushes the debt limit through the Presidential election. Press Secretary Jay Carney said in a statement that at today’s meeting, “The President restated his opposition to a short-term extension of the debt ceiling, explaining that a short-term extension could cause our country’s credit rating to be downgraded, causing harm to our economy and causing every American to pay higher credit cards rates and more for home and car loans.” Reid was more explicit:
I want to reaffirm my statement from last night. I will not support any short-term agreement, and neither will President Obama nor Leader Pelosi. We seek an extension of the debt ceiling through at least the end of 2012. We will not send a message of uncertainty to the world.
If you link this up with Boehner’s demand of a dollar-for-dollar relationship between the increase in the debt limit and deficit reduction, then there’s no way there would be less than $2.4 trillion in any deal (the approximate number it is expected to take to get through the elections). On the conference call with the Republican caucus, Boehner claimed that solutions of anywhere between $3 trillion and $5 trillion were available.
I don’t believe the maximalist number for a second. But Nancy Pelosi charted the course to $2.4 trillion. It includes one big accounting gimmick – $1 trillion in “savings” from drawing down in Iraq and Afghanistan, mainly through a change in how CBO would score it. And then there are $1-$1.2 trillion in agreed-to spending cuts, and an additional $300 billion or so from foregone interest payments from the reduction of debt. If you added reductions to mandatory spending it could be even bigger. No health spending or entitlements would be touched.
It’s somewhat doable, but without revenue, the leader of the House Democratic caucus, John Larson, said that there would be no Democratic votes available. And there are enough Republicans who flat-out won’t raise the debt limit at all that it’s difficult to plot a path to passage in the House, to say nothing of the Senate.
The Wall Street Journal is reporting that there’s a deal for around $4 trillion in deficit reduction being floated, but it’s being held up on the structure of how the debt limit would be raised.
The emerging proposal would work in two phases, according to aides. Congressional staff has identified an initial package of between $900 billion and $1 trillion in spending cuts, which Congress would pass by the Aug. 2 deadline along with an increase in the debt ceiling by the same amount, aides said. That would increase the government’s borrowing authority through the end of the year, aides said.
At the same time, the plan would establish a commission that would be charged with further cutting the deficit by the end of the year through an overhaul of the tax code and changes to entitlement programs, such as Medicare, Medicaid and Social Security, aides said.
The amount of the deficit reduction package that the commission comes up with would be the amount Congress would then vote to raise the debt ceiling, aides said, presumably increasing the government’s borrowing authority through 2012.
The question is whether the President and the Senate Majority Leader consider this a short-term debt limit increase or not; it doesn’t seem so. It’s unclear whether or not the proposed Catfood Commission II would have a guarantee to hit certain targets, meaning that it would have to reduce the deficit – and thereby increase the debt limit – later. So the Dems want the debt limit increase in one shot, even if the deficit reduction comes in two tranches.
It’s pretty incredible that you have a rogue credit rating agency forcing a large deficit reduction package based on their cockeyed view of the political process.
UPDATE: Pelosi confirms the two-tier idea. The question looks to be whether Republicans will agree to increase the debt limit all at once.
UPDATE II: I put this on Twitter, but not here. S&P says they’re so worried about political gridlock that they would downgrade US debt without $4 trillion in deficit reduction right now. But if the Congress does nothing – if there is political gridlock – the Bush tax cuts expire, and revenue increases by… $4 trillion. That just shows you how absurd this all is.
UPDATE III: Harry Reid’s latest statement doesn’t sound encouraging:
I am deeply disappointed in the status of negotiations with my Republican colleagues. I have said repeatedly, including last night and again today, that I will not support any agreement that fails to raise the debt ceiling though the end of 2012. Anything less than that will fail to provide the certainty that the markets – and the world – are looking for, risking an immediate downgrade of America’s credit rating. This would force a tax increase on all Americans, and drain their savings funds and retirement plans as well.
I hope that Speaker Boehner and Leader McConnell will reconsider their intransigence. Their unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States. We have run out of time for politics. Now is the time for cooperation.
Canned foods – strong buy!





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“It’s pretty incredible that you have a rogue credit rating agency forcing a large deficit reduction package based on their cockeyed view of the political process.”; yeah, the same yahoo’s who oversaw the housing market fiasco.
All I know is the politicians are NOT listening to the people.
Jay Carney, “…causing harm to our economy” because interest rates might rise. Well, what does he call 9.2% official unemployment, if not harm?
I said this yesterday, and I still believe it to be true.
This is theater. It wouldn’t surprise me if next Friday another “walkout” occurred, where both sides claim they just can’t agree. Then on Monday the Dow will collapse, just after it did after the first TARP vote. Then they will once again claim the gun of the ENTIRE US ECONOMY is at their heads forcing them to make these cuts.
S&P’s move here simply reinforces that. It’s another “See, we HAVE TO CUT CUT CUT or ZOMG look what could happen.”
This week you’ll probably start hearing them set up the false choices of “We need to compare what happens if we default versus what happens if we cut. If default is worse, then surely we must cut.”
The only question I see is whether the American people stand for this in the same way they stood for a Supreme Court stealing a Presidential election, a President lying us into war, and the banksters stealing billions or trillions in the two act play of foreclosure fraud and bailouts. If history is an indication, enough will be convinced that default is worse than the cuts and they’ll take them the same way.
And you know what?? At the end of the day, if that’s what happens, then maybe the American people DESERVE to have these programs cut.
For me, this is the key . . . but this finance stuff is not what I understand . . .
Hell of an update Mr. Dayen, thanks.
I can only believe the moneymarkets n their ilk hold such huge sway and power on our erected offals that it will be THEM who decide how any of this ends up.
CDS, hedge insurance purchases/bets, all this impacting action and the pols we elected . . . . n trillions and trillions at stake from betting against success . . . this is all i see.
Am I mistaken in my last line?
must read
http://www.economicpopulist.org/content/economy-destroyed-enemy-washington
To quote a sports line from Dallas history…look what happens when men grow up to be babies….These folks have made hash based on their own narcisistic needs.
Shit I HATE yer thots hoss . .
But damn they sure ring true, and familiar.
Same patterns, same players, n rotating villians amongst the bought n paid for erected offals to pull it off.
Great post by Mr. Dayen.
It’s fuckin ugly, and gettin fuglier Pups.
Action? Hmm?
we really, really, didn’t want to cut your Social Security and Medicare. Wall Street made us do it.
A horrid claim for good hash . . . ;-)
Shredded taters, ham, briscuit, onions, garlic, seasalt, herbs, some chiley . . . a grill, pan and some oil.
Two poached eggs on top.
Dayang!
*G*
“The word “collusion” comes to mind, with the elites of the world demanding that their tax cuts be paid for with someone else’s money.”
Just like extending the Bush tax cuts – a richie richie deal! Only the “lesser people” lose.
That guy is really, really impressive at times.
And to think, he was the father of “Reaganomics.”
Hang on there a sec OFG…
Just like Irak didn’t deserve to be bombed due to lies and propaganda, neither do we the American Citizens deserve a foul blow for the same reasons.
What we actually deserve, and is our right, is proper leadership and attention to our needs, not corporate and political deal making needs.
Yep, a good read. For what it’s worth I think the ruse that O has pulled in his entitlement claims has been widely exposed. What that will get us remains to be seen, but he certainly did not intend to have so much come to light about his purposes.
I hear you Kelly, and know you’re right that we don’t really deserve it.
But at some point I’ve gotta believe the American people have to be held accountable for their actions (or inactions) too. At some point maybe it will be fair to say “You were warned, you had options, you chose the comfort of sitting on your couch.” Is that not at least a little fair???
As another example, there is NO LAW, regulation, or any other thing that FORCES Americans to vote for Democrats and Republicans only. And when we have both parties suggesting torture is ok, ending habeus corpus is ok, assassinating American citizens is ok, then IMO voting for either one of those parties, when there is NOTHING forcing them too, makes them somewhat responsible for those things occurring.
At least IMO it does.
Edit: Oops, sorry for the caps. I notice you used the italics to emphasize words and it does look good. I’ve just got to switch to that method too so as not to seem like shouting.
If the parties force $4 trillion in cuts because of credit agency black mailing, it’s time to get in the streets and protest. Protest S&P offices, protest both parties and any coward who votes due to threats from a corrupt credit agency that clearly wants to use its power (power created in shared belief that would mean nothing if those in power ignored the f#ckers) to force an end to government social services for pure crony-capitalism (socialism for the rich and the corporations, jack sh1t for the people).
So is Obama the President and Commander in Chief of a superpower or the mail clerk at Standard and Poor’s? Maybe he has more in common with Harding than Hoover.
the president has not ONCE mentioned that “this problem has been caused by the bush tax cuts that the republicans insured would create a positive climate in the economy”
no
not obama, he wants a hoover deal and by god he’s gonna get one no matter WHAT
Not to be dramatic or anything, but at this point we are watching our nation being deliberately destroyed before our eyes.
Lost in all the blather and back and forth is the simple fact: Obama has pissed on the Democrats social safety nets and security, and thereby totally endangered the future of the Democratic Party, whether he wins or loses. He is the leader or chief of the Democrats and has run from that role like a rabbit. He only wants to get a “Nixon to China” role for the history books, and cares less what happens to the country and people in the middle and lower classes. Already 1/3 of his campaign funds for 2012 are from Wall Street. Is that a hint where his loyalties lie?
Really, just like he pissed on Rev Wright…all makes such sense now. O did not need some social justice/liberation theologian calling him out. Just a different lens.
I hear you too.
But when it comes to the electorate at large, what with the media outlets being owned by Corporations who are pushing their wills simultaneously onto DC and the electorate, how exactly was the electorate “warned”? What were they warned?
And it’s really true about the off-the-couch thing you raise. But really, look at Lawrence O’Donnel for a moment; people don’t really believe that SocSec/Medicare is on the table. We know better.
These are complex obstacles, hurdles actually, that average people have to jump, if they even know that they’re there.
Bottom line, no way am I blaming the average citizen when the oligarchs have most of the cards. At least, that keeps the point of view consistent for me.
i think he sees the snowball coming down the hill
it will engulf and destroy us all
If we have 5 more years of Obama the country will be the wild west again…rule of law will apply only to the little people as the priveledged classes are exempt from accountability.
Rating agencies wrecked our American economy and the Global one. Households equity will be eroded even further than the devaluation of housing and private retirement funds. Sacrificing the Soc Sec system, medicare and medicaid will put us back into the last century. One major difference is that people no longer are rural and cannot hunt, gather and farm.
The criminality of “collusion” between DC and Wall Street surpassess the era of vertical trust.Mr. Obama’s inhumanity to mankind is legend.
The $4 trillion number keeps cropping up. And as noted in the main post, that’s the cost of the Bush/Obama tax cuts.
Of course, that’s just a coincidence. Did I mention that I’m a coincidence theorist? Conspiracy theorists have such a bad reputation. So I just accept that everything is a big coincidence.
Paul Craig Roberts was put on Bush’s no fly list because of his outspoken opposition to the Iraq war and the Patriot Act.
I’m afraid that ship has already sailed.
Because W’s America is not the land of the free…but we’ve known that.
for no good reason
raise the frikin ceiling you crimmanal pieces of crap
Mmm, excellent points.
I guess I just thought that if I figured out the real deal without the media, that anyone can.
That probably is an unfair comparison because I’m disabled and don’t work have the time necessary to figure these things out.
A person working 54 hours a week…. I guess really is quite at the mercy of our media.
I still believe in accountability, but you raise excellent points. I’m gonna need to reconsider that deserves it thing.
Damn this is hard, and they hold all the tools that would make it easier.
I’m just tired of all this shit. Every day. Wake me when it’s over.ZZZZZZzzzzzzzzzzzzzzzzzzzzzz.
If the rating agencies downgraded Treasuries, the company executives would be arrested for the fraudulent ratings that they gave to the junk that Wall Street peddled to the rest of the world. The companies would be destroyed and their ratings discredited. The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt. If Goldman Sachs is too big to fail, then so is the US government.
jail these criminals!!!!
go get em Pete
http://www.youtube.com/watch?v=–TjbxgFYS4&feature=player_embedded
The Oligarchy have already decided on the outcome they just haven’t yet been able to choreograph the outcome … stay tuned.
A very good read.
Did you ever think you would see the day when a Former Reagan appointee would advocate for single payer health care?
I know I didn’t.
Obama called time, so here comes ‘voluntary austerity’ or we thrash your economy.
Cuts now with revenues to be named later (maybe). Once again Obama leaves the progressives with the choice between – the bad deal that ‘solves’ the problem by kicking it down the road and – the right thing that inflicts the most pain on the people.
Another proof that it isn’t the perfect that is the enemy of the good – it is the politically possible that is the true enemy of the good and the will of the people.
Everyone feeling a bit Greece-y now?
Goldman boys, Inside Players, Cantor and others shorting the Market will make out like bandits with a big fat short they know is coming.
Eventually they long for the huge pump and dump when they privatize Social Security – sending the funds to the Wall Street Casino. It will become a shorting oportunity more massive than the Real Estate Short they created.
BHO= just another sleazy lawyer/liar
making millions with their insider info will be teh easy
manipulate the market
Well, the voters who care about what happens are being held accountable for their votes; according to polls, even self-identified Republicans object to the Republican positions on dozens of issues by 55% to 70%.
And while lots of voters voted for Republicans in 2010 because the Congress couldn’t get things done, so they believed putting more Republicans in Congress would make the Congress work together. Again, voters are being held accountable.
But while conservatives and Republicans are busy telling the voters the problem is Democrats and Obama, the progressives are telling everyone the problem is Obama and the Democrats. Obviously the voters should vote to elect a lot more Republicans so fix Washington.
If that isn’t to your liking, what are you going to do about it? A third way whether a party or something else isn’t going to happen if no one makes it happen, like the Tea Party, the revival of Ross Perot, et al.
im with you
its wearisome
Interesting. Very interesting.
Could be that the banks need another bailout. And this will surely provide the excuse. Total conjecture.
S&P is just the first of the money moguls to call in their chips, proving our government is really not that relevant to the life-styles we can look to. Money is in charge.
Obama is in so far over his head the ain’t ever going to bob up.
As I’ve heard, we live in interesting times. I never thought I would see the day when S&P was dictating what the US Government must do to avoid a credit downgrade. All the talk about a sovereign currency and blah, blah and we appear to be no better off than Greece. Someone else will dictate the terms of our austerity program, aka surrender.
Of course, everyone will say we cannot default bc the markets and the economy will go in a tail spin. I’m not at all optimistic about the people coming to the rescue. Most people don’t understand it and when they try the reaction is blame Obama since he is President. I’ve heard a lot of that in my small circles already even though they do not support SSMM cuts.
So it suggests that we are in for some severe cuts in entitlements. Of course, there is some risk in this prediction. Maybe some people will realize that this is a made up crisis for the benefit of the wealthy and Grover Norquist. Maybe Obama will limit the cuts, who knows.
You paint a bleak picture. I do think this can only happen bc the american people were not informed. But I also think that in the months following there will be a closer inspection, at least that is my hope. If the polls are correct, then there will be a shit storm for the thugs. But even that is not comforting since I am afraid the young people will leave us over time.
“The ratings agencies, which played a major role in the financial meltdown . . . ”
Yes, indeed.
From Carl Levin’s Senate committee report, “WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse,” April 13, 2011,
http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf
(5.8 MB file)
“Although ratings downgrades for investment grade securities are supposed to be relatively infrequent, in 2007, they took place on a massive scale that was unprecedented in U.S. financial markets. Beginning in July 2007, Moody’s and S&P downgraded hundreds and then thousands of RMBS and CDO ratings, causing the rated securities to lose value and become much more difficult to sell, and leading to the subsequent collapse of the RMBS and CDO secondary markets. The massive downgrades made it clear that the original ratings were not only deeply flawed, but the U.S. mortgage market was much riskier than previously portrayed.
. . . During the first half of 2007, despite the news of failing subprime lenders and increasing subprime mortgage defaults, Moody’s and S&P continued to issue AAA credit ratings for a large number of RMBS and CDO securities. In the first week of July 2007 alone, S&P issued over
1,500 new RMBS ratings, a number that almost equaled the average number of RMBS ratings it issued in each of the preceding three months.1018 From July 5 to July 11, 2007, Moody’s issued approximately 675 new RMBS ratings, nearly double its weekly average in the prior month.
The timing of this surge of new ratings on the eve of the mass downgrades is troubling, and raises serious questions about whether S&P and Moody’s quickly pushed these ratings through to avoid losing revenues before the mass downgrades began.”
Moody’s stock is listed under the abbreviation MCO.
S&P is part of McGraw-Hill (MHP). McGraw-Hill’s annual reports break down their business into 3 sectors, one of which is Financial Services. That sector grew from 61% of their annual profit in 2003 to over 76% in 2006.
If you look at the stock prices for MCO and MHP in 2007, they both peaked around the start of June, then began to decline. Their sudden pangs of conscience in their ratings, and the massive downgrades, may have been an attempt to stem that decline. Or maybe they just had epiphanies.
And now their ratings of anything are supposed to be credible?
To people that think that violence isn’t the answer.
The fear of working people rioting and taking their chainsaws to their bosses and wall street was the only thing that kept capitalism from destroying america like it did every other country in the 40′s, 50′s until the 80′s
These monsters murdered the american economy for bribe money. They pay our politicians hush money.
Unless they have a reason to treat us like human beings, we’ll just be commodities. The people that their policies murder will get less attention than “spoilage” in a shipment of produce.
We have to give them a reason to want to keep us happy.
I can already hear what the Obamabots will say to defend Obama when entitlements are cut. He was handcuffed by the ratings agencies and he had to do it. I won’t be his fault.
It does seem increasingly, whether you like Obama or not, that the choice is default or austerity. The S&P thing is just another kick in the ass.
Standard and Poors is speaking for the market makers. And this reflects the very real concern that Boehner does not have control of his caucus enough to get any deal, even complete capitulation. The Republicans have painted themselves into a corner and rather than capitulate themselves, are quite willing to force Obama to deal with a default. The market makers smell this.
Yep. It is the money moguls calling the shots. The government is virtually helpless.
Then he can make cuts in war spending or stopping the Bush tax cuts. He doesn’t have to go after entitlements.
That’s one kind.*G*
I’m not sure I understand the sequence of events for a default other than lay offs of non essential employees and non payments to contractors. That could have multiplier effects on the economy. That will force stocks down IMO. Do all the market makers want another recession/depression? Are they shorting the stock market now? Could the fed step in and do something? Need some bright economist here. We could easily lose more that way than through austerity.
Correct me if I am wrong but isn’t S&P demanding more than just a clean increase in the debt ceiling? If so this is ominous because it heralds their move into directing how and on what the government may spend.
Yes, they also want 4t in cuts. As I suggested, we are now very similiar to Greece, in that someone is dictating the terms of our austerity program. When I think about that and what THD wrote about I think the only way out may be the 14th amendment or minting a coin as some have suggested. Of course, we can always accept the terms of surrender but if Boner can’t sell anything to his caucus….
PS elections have consequences.
Should, could Obama be impeached? I know, with R’s in control of the House that will never happen. He’s too damn good for them.
Aaaaarrrrggghhhhh!
Yep. Sad but true. And more than a little scary, too.
Do the market makers want another recession/depression? No. That is exactly what they are trying to get through to Boehner and his caucus. But because it’s the market makers and not the market (too many people doing too many contradictory things in trading), they have used S&P to directly signal the participants about the results of passing the debt ceiling (another 50 basis points on US debt for a while into the future). The Fed could buy back US debt at higher interest rates. I’m not sure how that affects the exchange value. When you get into global implications it really gets complicated.
Of course it’s going to cause a double dip in the short run, but so is all this state austerity. It’s a piling on.
What is very interesting about the S&P public interview is if you figure out how much 50 basis points brings the interest rate to. What the Republicans have done if they don’t capitulate by Sunday is impose an immediate tax on Americans of whatever the “uncertainty tax” is for the market. Apparently it’s less than 50 basis points. Now, ask some T-bill trader what a $2T stimulus package would have done to the market. So in the first case we get some drama and the Tea Party says (erroneously) that it worked to lower the debt (apparently compounding doesn’t count). In the second we get infrastructure that lowers the cost of doing business in the future. If you were a rational economic actor, which would you choose?
I repeat. The US has the stupidest elites in the world.
I agree. At the end of the day, it’s up to the American people to demand better from our elected officials. The blessing of this country is that people can change the system in a heartbeat if they choose to.
I don’t remember who said it, but I read today what what is happening is just like what’s going on in Ohio, Wisconsin and other states where people are literally taking to streets to scream “NO” and politician are ignoring them. The politican are clearly happy to do the widly unpopular thing inspite of what voters are saying.
So my question to voters become…… what are you going to do about it? The people you elected are ignoring you, so you’re going to have to take action. I find myself wondering if Sharon Angle didn’t have a point after all.
Do you mean impeached? Or impeached, tried, convicted, and removed? The latter has never happened in US history. So why with Obama? This first is a transparently political option.
And what beside policy differences would be the charges. What high crimes and misdemeanors would you cite that the Republicans would vote for?
Also, the smackoffs @ S&P & Moody’s wtch 2 mch tv.
You’re right about the money. It’s postmodern warfare. Th’elites don’t even want our women or our land.
Speculating on irony:
I think we can all agree that Obama orchestrated this fake crisis as the shock doctrine moment he needs to gut SSMM, thus assuring his place in history as a “transformational” President.
Now let’s suppose that he didn’t reckon with the intransigence of the T-OP. And that the brinksmanship results in a default, with catastrophic economic consequences. (Another Great Depression, not Krugman’s “Lesser” one.) And, while Obama gets the blame for his betrayal on SSMM, the shock to the financial markets focuses all the anger and hatred at the MOTUs. And Zero is tagged as their poodle, which results in him being ousted in 2012 by an FDR type. (I leave speculation on that person’s identity to others, but let’s just imagine that it happens.)
I know that I will wake up soon, but it is a nice dream, is it not?
I do not understand this. Daily Kos, which is usually reliable says that $650 billion get disappeared from Social security. And tax rates stay the same preserving the Obama tax breaks for the rich. Plus Obama creates a trillion dollars from pixie dust.
This is clearly McCardle Math.
Anybody who does not think WallStreet is running this whole charade hasn’t been paying attention for the last three years. They (institutional investors) can easily manipulate the markets into a downward spiral at anytime of their choosing. My guess is, two or three days before the (arbitrary) deadline, the markets will take a plunge for two or three days and then a “deal” will magically be arrived at and voted on in haste to “save the economy.” I think at that point it will be time for some serious civil disobedience.
It’s laughable that S&P and Moody’s are lecturing the US and threating downgrades. Don’t forget it was those clowns who AAA rated bundles of toxic mortgages which caused this whole mess. They never have a problem doing whatever Wall Street wants.
If Obama had any balls, he’d tell them if they ever even mention a downgrade, he’ll sic the Justice Dept and the SEC on them and do what he should have done. Charged them with fraud and and throw the executives in jail. The nerve of those bastards!
Btw, the elites aren’t stupid. They are getting what they want…… total control. In a way, it’s like the theme of the Matrix. We are nothing more to them than a battery. They want our work and what we produce for them, and to get that they are seeking total control.
That’s what scares me the most about the future. Once we sell off America — and I mean that literaly —— Once the corporations own the land, the resources, even our food supplies, then our options become very limited.
But even if we go 14th amendment S&P may still arbitrarily downgrade. I think the money people are now on the edge of declaring or openly demonstrating that we have lost our sovereignty to the private business world. Norquist is succeeding in enfeebling us to the point of the bathtub drowning. They have for many years of course been unceasingly calling the shots but I personally see this as disturbing shift. Yes we are or are on the edge of becoming as Greece and so many under the thumb of the IMF.
They certainly behave like idiots.
On the interest thing, if interest goes up the price of the bond goes down. So the fed does not seem to lose anything there?? If they sell bonds, we all pay higher interest rates, but interest on short term bonds is negative in real interst terms so I doubt that is a problem, espcially since the fed can control short term rates, I think.
I think though that the stock market will get hit pretty hard as will other bonds. States and pension funds will be in trouble. These markets do not tolerate uncertainty well, as you suggest. This leads to how long S&P keeps a lower rating on the bonds, as some measure of the damage or tax on Americans for their profligate ways.
I always thought that Wall Street would try to end this thing. I am surprised I have not seen more actions.
No, the choice isn’t default or austerity. We are not facing an economic crisis, but a political one.
If the US government had the guts to do a $2.4T stimulus bill over one year (well it might take more), it could take the pressure off the Eurozone countries. We can’t do that because of the numbskulls in Congress and the numbskulls who bought them.
It would boost US debt to $16-17T, but managed right, it would get demand started in the economy again. And the growth started could quickly exceed $20T. Just that would restore the debt/GDP ratio to more sensible levels. But revenues in taxes would come in and the budget would rapidly go to surplus. Then we could continue financing global development through a negative balance of trade.
It is a political crisis.
you are indeed a pessimist. All the MMT economists are proven wrong. I agree, we are basically like Greece. The only way around this is to regain congress. Fail in that and we will have more of this.
I am so vulnerable. They decide to cut my SS and I won’t be able to afford to drive to the polls.
Okay, Mr. President, by not sending the Justice Department into the offices of Standard & Poor, Moody’s and other corporate and government rating agencies for their criminal complicity in giving shit securities triple A designations for lucrative bribes, you let that sophisticated protection racket remain free to now extort the nation you swore to protect from all terrorism.
Now pick up that phone and call your attorney general and order Holder to arrest every gdamn one of those blackmailers for bribary, extortion and financial fraud, convict them and send them to Gitmo to take the place of the lesser terrorists you have no need to keep locked up anymore….
I do agree we need a stimulus but that is not going to happen this year or next, bc of the numbskulls. On the debt, I don’t subscribe to any arbitrary debt limit whatsoever. They are all basically meaningless EXCEPI in the political sense, as you note. But once you get into politics there is no acceptable level of debt or deficit. You opponent will decide what it is.
Political crisis and not merely economic? Hmmm, yes, could be. Does that mean we need to man the barricades? It can have serious effects on our futures. That is the way empires end.
On reflection, a default is politcal.
The price of the bond goes down in the aftermarket. The Fed issues at face value. Yep, at the moment, moving from AAA to AA doesn’t mean much. Being rated as junk would probably draw rates over 10%. As bonds are less attractive in the aftermarket, money will flow to stocks and other securities raising those prices. But as the recession takes hold, those prices will drop.
So where does the money go for a better return?
I don’t know. We’ve never experienced this before. Maybe some folks will start investing in plant, equipment, and workplaces in anticipation of something somewhere down the line. I doubt it, but it is an investment option. And it would create employment and thus be stimulating to the economy. Which might produce returns higher than the ROI and risk analysis numbers would suggest.
Not merely economic crisis. No.
Not even economic crisis. The economic crisis ended in January 2009. Everything since has been the political failure to accurately respond to that crisis. Fix the politics, and you fix the economy.
But instead of fixing the politics we are likely to see “them” fixing the elections.
You can man the barricades as soon as they stop paying the police. They’ll be out there with you.
Congress and the Whitehouse. Democrats had the Congress before, but since Obama is a Republican DINO, nothing got done that should have been. Having a D next to their name says very little about the politician anymore. I think a growing chunk are fiscal conservative, 80′s era Republicans who are moderately socially liberal, the largest chunk are pushovers who are moderately socially and economically liberal, but will bow down in a heartbeat to pressure from a president with a D next to their name. A dwindling segment are still economically and socially liberal, and many of them also cave in when the president, blue dogs, and pushovers are on the same page. Not good for Americans as this is their remaining defense against the wealthy who want everything.
This does not sound good.
Super Congress Debt Ceiling Negotiators Aim To Create New Legislative Body
Debt ceiling negotiators think they have hit on a solution to address the debt ceiling impasse and the unwillingness of the public to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress.
http://www.huffingtonpost.com/2011/07/23/super-congress-debt-ceiling_n_907887.html
If unemployment rises, profits will fall and the market will contract. This will happen on a prospective basis on the first Friday the employment rate gets to 10%. I also don’t know the sequence after that or how rapid it is. But on T bonds, the fed can do another qe3 to keep short rates down, but maybe not if it ever gets to junk status. But the interest rate impact will spread to other issues, especially state bonds and the pension funds.
I don’t know what S&P is doing but if this is a move to get the republicans to do something, good luck. We need an economist to come here and lay this out for us. I’m in up to my neck.
So much of “can’t we just get along” like bi partisanship. So what is the solution do you think?
I’m screaming so loudly that my neighbors might call the police
We’re getting our own house of lords
Ok fuck it, I’m going to get a fiddle to watch this bitch burn
OK that’s enough for one night. I’ll let you man the barricade while I get a little shut eye.
The perennial cartoon has the Donkey-as-Sysiphus pushing the boulder with TAX & SPEND chiseled in it. They would run for office but they couldn’t hide. The party ran from the el-word, now it’s running from the D-word, hoping to win votes with the right lapel pin and most-savvy necktie.
The rating agencies haven’t exactly been covering themselves with glory lately despite their recent not so subtle hint to raise the debt ceiling now so it’s no surprise that they would try to get in on some of that sweet extortion action that the Republicans have got going.
The only good news is this plan spread the cuts over 10 years and the creation of this new super congress would start after the next debt ceiling debate. That gives us a chance to fight back or get the f#ck out if you have the chance. Maybe Obama won’t be happy that Medicare and SS aren’t immediately on the chopping block though. The Super Congress will be composed of 6 members from each party. A simple majority is needed for legislation to pass. If they pass it, it’s law.
Who wants to bet a conservative Democrat or two or three will find their way into that body, hence everything the Republicans want, aside from banning abortion and gay marriage, will get through? Only takes 7 to pass.
We know how to fight back (not waiting around passively for elections), it’s just a matter of persistence and numbers.
Ways out? Canada has a point system. If you have a master’s degree and can speak French, you’ll likely get accepted, but it could take up to 2 years to process. Europe is tough. Best bet there is through university, though only a few countries there offer free or cheap tuition to non-EU citizens anymore. The rest are extremely expensive now and the chance of not finding employment after attending may make the whole thing not worth it. You can run around looking for someone from a better developed country to marry, haha. I’d advise against teaching English unless you have 5+ years of experience and are able to teach IB or have a Phd. The entry level stuff is a dead end almost everywhere. No job security, few opportunities for advancement, usually have to pay for normal social services that citizens get from their companies out of your own pocket (ie, lower-middle class wages, but poverty life).
It will be interesting to see how the Tea Party likes the Super Congress.
So they will have the ratings agency set the terms. Hysterical. Standard and Poor’s will dictate to the U.S. Congress. When the economy crashes later this year it will be Standard and Poor’s fault. You can’t make this shit up. But that’s exactly what they did.
We could have saved alot of money already by just eliminating the debt ceiling. It serves no useful purpose if it constantly has to be raised. I can’t believe that damned old doddering fool Reid agreed with McConnell about forming a Super Congress. That dipstick is a total sellout and will agree to anything. Boehner I understand, but do we really want a lush with that much power? As for S&P, this is just another ploy by Obama to get his grand deal through to make him look good to his buddies on wall street. 16 more months of this turncoat is 16 more than I really want to think about. Damn, I think I’m getting a migraine!
Where is the power to control the government’s access to capital? That’s who is in charge.
They are not just planning to repeal the New Deal. They are planning to repeal the Unite States.
Ding!
http://krunchd.com/beersmightharm
from the URL you might not know what this
is about
http://krunchd.com/beersmightharm
(not beer you drink, rather this guy:)
http://krunchd.com/beersmightharm
http://www.businessinsider.com/meet-the-sp-executive-who-will-downgrade-us-debt-2011-7
more:
http://robertreich.org/post/6301523230
End of Medicare As We Know It / Garamendi: Private cartel:
admin cost 30%
http://www.c-spanvideo.org/program/HouseSession5237&start=31466
http://www.project-syndicate.org/commentary/stiglitz123/English
http://www.businessinsider.com/richard-koo-austerity-2010-7#-1
I say let the Bush tax cuts for the billionaires lapse and impose
Windfall Profits Taxes on the money center banks receiving 0%
reserves at the expense of everyone else’s savings.
https://sites.google.com/site/evernewecon/
This is nothing that a squadron of Navy SEALs fast-roping onto the Standard & Poors building couldn’t fix.
the real question is why isn’t everybody at a senior level or better at s&p and moodys rotting in guantanomo after what they did to the country in 2008?
I dunno… each day just seems to get worse. I used to be a glass half full kind of person, but anymore that’s harder to keep up. This is such totally bogus b.s. that I don’t even know what to say.
S&P, who basically was a KEY PLAYAH in *crashing* the USA (and sort of the world’s) economy is now holding US middle/working class citizens hostage to even more spurious crap.
Sadly most US citizens continue to NOT pay attention and thus PERMIT themselves to be plundered by these CROOKS, THEIVES & bald-faced LIARS.
Dunno how to wake people up. This is such unmitagated crap, and clearly these jerks have figured out that they can be as front about their theivery as possible bc clearly no one is going to bother to protest (and even if we do, SO what?).
Oy vey es mir…..
3 more links (the top three here) added to
the ones posted above, repeated below.
http://goo.gl/srJKz
http://goo.gl/n7Uj4
http://goo.gl/Aie0l
——————————————
http://krunchd.com/beersmightharm
http://www.businessinsider.com/meet-the-sp-executive-who-will-downgrade-us-debt-2011-7
http://www.c-spanvideo.org/program/HouseSession5237&start=31466
http://www.project-syndicate.org/commentary/stiglitz123/English
http://www.businessinsider.com/richard-koo-austerity-2010-7#-1
http://robertreich.org/post/6301523230
One month after the SEC announces an investigation of fraud charges against S&P and the country gets a threat in the form of a downgrade?
Sounds like there has been a massive CDS buy and S&P knows this and is rubbing their hands together in glee.
So, S&P, was Enron your trial balloon?
You are on the money, that’s why the Federal Reserve keeps the lid on the rates, so it does not cost them anything. We all know that inflation is running full steam! They are all a bunch of lying sacks of S@##. We should replace the ink & papper at the Federal Reserve with tar&feathers!
plus pour vous
http://www.guardian.co.uk/politics/2011/jul/24/vince-cable-us-debt-rightwing-nutters?CMP=twt_fd
http://www.businessinsider.com/its-official-the-whole-world-thinks-republicans-are-dangerous-maniacs-2011-7
I’m willing to bet this “commission” will be tasked with only looking at spending cuts and not revenue generation. So they’ll be able to get spending cuts by fast tracked simple majority votes and taxes increases must be fully debated and can be filibustered in the Senate. If Dumbocrats allow that to happen you can kiss Social Security, Medicare, and Medicaid goodbye.
If Obama’s fiscal commission is any indication, the commission will be composed of right wing zealots and business friendly conservative Democrats. Who are likely candidates? Max “Sellout” Baucus, Ben “I never saw a millionare I didn’t love” Nelson, and Kent “I love tax cuts” Conrad.
This cannot be stopped in the short run. The only way it can be stopped is if Obama goes down in flames in 2012 and it’s the Democratic base that lights the match. Then future Democratic Presidents won’t dare try to tack to the right.
MICHAEL HUDSON July 22, 2011 Democracy Now:
Pushing Crisis: GOP Cries Wolf on Debt Ceiling in Order to Impose Radical Pro-Rich Agenda
They’re taking the money and running, because they know that unemployment is going up. The game is over. They know that. And the only question is, how much can they take, how fast?
http://michael-hudson.com/2011/07/save-the-gambling-bankers/
Yes that will be the case for those completely dependent on the system as it’s “rules” are regarded as intrinsic and real by the common man.
It’s like property lines in a suburb and letting your dog off the leash to take a dump. The homeowners all believe in the boundaries , artificially created though commonly agreed upon , while the dog nonchalantly wanders and pisses where it will because those lines between properties are an abstraction it is unaware of .
The dog knows it’s business and it lives in actual reality whereas those property owners in the suburb live in an artificial abstraction which only works as long as it is commonly agreed upon.
The laws are only viable only as long as the majority of the population subscribes to them .
Are the directors of S&P’s parent company cooking meth? I believe the legal term for this is “tugging on Superman’s cape”.
http://investor.mcgraw-hill.com/phoenix.zhtml?c=96562&p=irol-govboard
There’s case law that an anti-logging activist who spiked a tree on federal land wa guilty of malicious mischief because he reduced the economic value of federal property was reduced. If Uncle Sam can drop the hammer for spiking a freakin’ pine tree, what do you think he’ll drop for spiking the economy? Let’s see, there’s $4 trillion in govt-owned T-bonds (mostly in trust funds), each of those T-bonds that drops in value by at least $1,000 creates a separate felony count. So many felony counts that’s barely worth counting all the other charges for extortion, loansharking and other predicate RICO crimes that taking this action leaves S&P open to.
Whoever willfully injures or commits any depredation against any property of the United States, or of any department or agency thereof, or any property which has been or is being manufactured or constructed for the United States, or any department or agency thereof, or attempts to commit any of the foregoing offenses, shall be punished as follows:
If the damage or attempted damage to such property exceeds the sum of $1,000, by a fine under this title or imprisonment for not more than ten years, or both…[corporate felony fines are either $500k per count or twice the pecuniary loss to victim, ouch!]
http://www.law.cornell.edu/uscode/18/usc_sec_18_00001361—-000-.html
DOJ US Attorney manual on malicious mischief (destruction of federal property).
http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/crm01666.htm
Get ready for TARP 2.0:
http://www.nakedcapitalism.com/2011/07/get-ready-for-tarp-2-0.html
http://www.nakedcapitalism.com/2011/07/more-shades-of-tarp-latest-deficit-ceiling-plan-to-establish-extra-constitutional-legislative-process.html
We’re all going to get bled some more until the American public is turned into an empty husk, a debt slave, proles in a two party oligarchy.
TARP 1.0 was a huge mistake. Letting the Wall St and the TBTF banks go under was NECESSARY to avoid a depression and correct the economic and political balance of our country. It’s all still necessary.
You should turn that into a post. What an important comment.
I go with Harding.
Hoover had a lauded career with solid performances in what he’d done, prior to his presidency. Hoover is, however, more well known to most Americans, which is useful for comparison’s sake.