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"It’s actually a bit over the top and unfair to compare Barack Obama with Herbert Hoover – unfair that is, to the memory of Herbert Hoover.
In essence, the debt ceiling dispute is not forcing a compromise on this President, but is instead is viewed by him as a golden opportunity to do what he's always wanted to do....
So spending will be further cut, debt deflation dynamics will intensify, sales will go down more, more jobs will be lost, and tax revenues will collapse even further. Which will set the whole process off again: more spending is cut, sales go down more, more jobs are lost, and tax revenues fall more, etc. etc. etc. until no one is left working. All are radically underestimating the speed and extent of the subsequent damage..."
The debt ceiling charade is political theater and it's Obama the closet reactionary who wants to cut social programs and plunge the US into a Great Depression.
Snip from Yves:
We commented last night on the parallels between the pressure tactics used to railroad the passage of the TARP and our current contrived debt ceiling crisis. The similarities have increased in a predictably bad way. Even worse than the economic toll radical budget cutting will impose on ordinary Americans is the continued undermining of basic democratic processes.
As with the TARP, we have the drumroll of a purported threat to public safety, namely the possible Destruction of the Financial System as We Now Know It. John Boehner is stoking the panic by saying there needs to be a deal by the opening of trading in Asia or the Market Gods will take their vengeance. Turbo Timmie will no doubt warn of dire consequence of the failure to ink a deal by the supposed drop dead date of August 2 when he makes the rounds on Sunday TV.
These credit reference agencies are an interesting concept.
As far as I understand it, they have absolutely no legal standing.
They are in fact a creation of the banking system, designed to facilitate the credit worthiness of their (the banks) clients
and derive their (the rating agencies) income largely from their clients (the banks).
The agencies role has sort of morphed into rating all sorts of things but essentially it all stems back to serving the interests of the banks to the extent that the rating agencies were largely absent during the "banking" crises.
"The threat of a downgrade has made Standard & Poor’s a target for critics chafing at demands from a company that blessed the mortgage-backed securities that led to the financial crisis."
"Senate Majority Leader Harry Reid, a Nevada Democrat...... “I wish they had made a few demands when Wall Street was collapsing,” said Reid. “They were silent then. Maybe they’re trying to get more energized.”
"The threat of a downgrade has made Standard & Poor’s a target for critics chafing at demands from a company that blessed the mortgage-backed securities that led to the financial crisis. "
Now it's about sovereign debt, hence the agencies non-legally binding "opinions" as to a governments credit worthiness.
But again, who's interests does that rating serve !
"As the London-based managing director of sovereign credit ratings at Standard & Poor’s, Beers will help determine whether the U.S. government’s credit rating will be downgraded as a result of the battle over raising the debt limit."
“For us, the issue is not the debt limit -- it’s the underlying fiscal dynamics,” said Beers, who has been rating governments for the company for 20 years. “It’s not obvious to us that this political divide that is proving so difficult to bridge is going to be any more bridgeable three months from now or six months from now or a year from now......He said he didn’t know when an S&P committee would decide whether to cut the credit rating. “Depends on events,” he said. ”
"Critics say the company is misreading the political dynamics in Washington and that it shouldn’t engage in political prognosticating at all"
“If we fail to increase the debt ceiling, they have every right to take the U.S. down as many notches as they want,” said Jared Bernstein, former economic advisor to Vice President Joe Biden. “I don’t look to S&P for political analysis” and “their job is not to try to do political crystal-ball gazing. Their job is to assess the reliability of U.S. debt......U.S. Can Meet Obligations Bernstein said, “Nothing fundamental has changed in the ability of the U.S. government to fully meet its debt obligations.”
