Posted on 07/15/2011 7:30:49 AM PDT by SeekAndFind
The ratings agencies — all-knowing, all-seeing, omniscient — have weighed in on the U.S. federal debt “crisis,” talking about downgrading U.S. paper in anticipation of a Beltway failure to cut a deal to raise the debt ceiling, thus engendering a “default.”
Oh, please. Can anyone believe that the global capital market cannot distinguish between a Greek-type situation, in which the government literally cannot service its debts, and the U.S. condition, in which a political dispute might delay some interest payments for a few days?
The question answers itself. More generally, has there ever — ever– been a case in which Moody’s or Standard & Poor made an announcement in light of information not already known by everyone? The ratings agencies, always closing the doors on empty barns, are virtually worthless, and would be unlikely to survive an elementary market test were it not for some legal requirements that their ratings constrain certain investment decisions.
Moreover, even the underlying premise is incorrect: In the event that the debt ceiling is not increased, federal revenues will be far more than merely sufficient to service the existing debt, roll over maturing debt, etc. Revenues will be sufficient to pay Granny, our servicemen, and other such untouchables. The ethanol producers and myriad other interests might have to extract their snouts from the federal trough for a few days; but so what?
Pay no attention to the ratings agencies or to the media shouting about this early warning of Armageddon to come. America can and will pay its bills, and the real question is whether long-term discipline will be imposed upon the Obama effort to create a federal behemoth so metastatic that the nation will face a Hobbesian choice between massive inflation and a value-added tax. That is the real “default” scenario, about which the ratings agencies are clueless. The Republicans should and must stand firm: Send a small increase in the debt ceiling to the president, coupled with equal or greater reductions in outlays, and force him to sign or veto.
— Benjamin Zycher is a senior fellow at the Pacific Research Institute and a visiting scholar at the American Enterprise Institute.
So he is after a VAT Tax. But still keeping the income tax and all the other taxes.
Pay no attention to the men behind the curtain.................
The thing about "global capital markets" is that their run by idiot liberals in New York City. Thus, markets are extremely irrational and driven entirely by emotion (just like liberals). Ergo, yes, I believe global capital markets are stupid enough to not "distinguish between a Greek-type situation, in which the government literally cannot service its debts, and the U.S. condition, in which a political dispute might delay some interest payments for a few days..."
Where is Toto when you need him?
So if we keep borrowing to pay our debts, we’ll keep our triple A credit rating? This is insane. It’s like Visa telling you that you have maxxed out 5 credit cards and if you don’t take out a 6th to pay for them, they’ll ruin your credit rating.
RE: So if we keep borrowing to pay our debts, we’ll keep our triple A credit rating?
I believe the current ratings downgrade warning from Moody’s and S&P is pressuring both sides to come to a deal about INCREASING the debt ceiling.
Let’s say we DON’T increase the debt ceiling... what then? What possible reason could Moody’s and S&P give to downgrade our credit rating?
We have more than enough revenue to pay our debts, send out Social Security Checks and support Medicare/Medicaid and our Veterans and even Defend ourselves.
What we DON’T HAVE is MONEY to maintain the rest of government.
So, what do we do? For one, we can either :
A) CUT THE BUDGET OF EVERY DEPARTMENT BY 20%
or
B) ELIMINATE AGENCIES AND DEPARTMENTS WHICH DON’T MEET THEIR MANDATE ( e.g. Department of Energy and Department of Education ).
HOW DOES THAT AFFECT OUR CREDIT RATING?
So, if Moody’s insist that we increase our debt ceiling, give them the finger.
BTW, I don’t see anyone dumping US treasuries after their warnings. The market knows that the whole thing is worthless. It is just a demand for the US to increase the debt ceiling.
they downgrade Greece and other countries' debts if they don't cut spending and pay debt instead, and say they'll downgrade ours if we do!
"An official with credit rating agency Standard & Poor's, addressing a private meeting, laid out a scenario in which the United States would lose its sterling credit rating if it paid interest on its debt but failed to meet other obligations, according to two people familiar with the discussion... "
No games being played here LOL!
Seriously.... For Fiscal Year 2011, Treasury expects $2.23 trillion in revenues, from which it must pay bond holders $213 billion in interest. NOTE: That’s less than 10% of revenue.
As Sen. Pat Toomey (R., Pa.) explains, if Treasury can manage this, America will not default (if they can’t manage this, Tim Geithner needs to be shown the door, PRONTO).
We’re not in reality anymore, Toto...............
You have to realize how most governments around the country react to a reduction of revenue. Rather than cut the fat such as bloated layers of management and administrators, they take the scapel right to the muscle - and cut in the parts of government that actually do something - to pretend that even a small cut will have painful consequences.
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