Today's Coming Crisis Movie

Wednesday, August 10, 2011

"How F***** Are We? Pretty Darned" -- America's debt past point of no return

The Empire's Decline is usually a slow-moving affair. It took about 30 years to reach August 9, 2011. Things have deteriorated gradually, but that's all changing. This week we are privileged to the watch the Decline in real-time. Where do we stand?

The stock market crashed Monday, with the Dow Jones Industrial Average losing over 600 points after Standard & Poors downgraded the U.S. credit rating to AA+ with a negative outlook, which means that further downgrades are possible in the future. The Nymex oil price fell $6.41 to $81.21/barrel, proving once again that Academic Economists are surely right in thinking that oil prices always reflect supply & demand fundamentals.

Everybody with "skin in the game" has a corn-pone opinion about the ratings downgrade. Billionaire Warren Buffett is infuriated, saying America's credit rating should be quadruple A (AAAA), a rating which only exists in his mind. Liberals like Robert Reich and Paul Krugman are also very angry because they know that debt doesn't matter. As Alan Greenspan opined, debt can always be paid off by printing money (see the Daily Ticker video below).

And because we can print money, there's no reason why the U.S. can not pay off it's debts. The Daily Ticker's Henry Blodget points out that we have to consider more than our ability to pay off our debts. We must also consider our willingness to do so. Just ten days ago—how time flies!—it appeared that the U.S. would not agree to pay the bills it had already agreed to pay.

Politicians are blaming each other, with Democrats calling it "The Tea Party Downgrade" and Republicans calling it "The Obama Downgrade." That's the spirit! More precisely, that's the spirit which caused Standard & Poors to downgrade the United States. (more)