Posts Tagged ‘credit downgrade’

How to destroy capitalism in one easy lesson

February 5, 2013

Today, February 5, 2013, U.S. Attorney General, Eric Holder – the socialist Obama-appointee who currently heads up the Justice Department – is expected to bring a civil law suit against Standard & Poor’s Rating Services, one of New York’s three giant bond-rating agencies. Several state attorneys general are expected to join this rent-seeking lawsuit.

This suit is designed to bankrupt the company and send out a warning signal to the remaining two giants not to mess with the Obama administration. Incidentally, the law suit will strike yet another Obama blow against the rule of law and anything remotely resembling laissez-faire capitalism in the United States.

Officially, the law suit is targeted at S & P for its failure to predict the housing meltdown that led to the financial crisis in fall 2008. In truth, it is a revenge action because S & P downgraded the U.S. credit rating following the failure of the Obama administration to address the debt crisis in fall 2011. If the federal courts buckle under such administration pressure, the Madisonian experiment is over and yet another Republic will be well on its way to internal dissolution.

The financial crisis was generated not by any rating agency, but by a cross-party political conspiracy to bludgeon mortgage companies to extend mortgages to minority households that had no resources to enter into home ownership. A crude vote-seeking frenzy ensued, fed by Fannie Mae and Freddie Mac, two government-enterprises that were shell agencies for a Ponzi scheme in the housing market. S & P’s error was ever to take credit guarantees emanating from the government with anything except supreme contempt.

Let us hope that the courts toss out this evil lawsuit and award damages for reckless litigation against the Juatice Department and its co-conspirators.

U.S. credit rating downgrade well-deserved

August 6, 2011

On Friday August 5, 2011, the United States government was rapped sharply over the knuckles by Standard and Poor’s, the credit rating agency. The agency lowered the government’s AAA rating to AA+ with a negative outlook. The U.S. had enjoyed a AAA rating for a period of 70 years.  The rapped fingers of President Obama, Treasury Secretary Timothy Geithner, Senate Leader Harry Reid, and House Speaker John Boehner, will be smarting badly as I write this column.  It is a moment of shame for all Americans.

The shame is of our own making.  We have elected into office since 2000 two presidents unfitted by reason of low ability and unacceptably inadequate economic education for the responsibilities that they assumed.  We have elected into office for many years members of Congress whose dedication is more to raising campaign monies through pork-barrel spending than to effecting sound policies for a nation in long-term relative decline.

The implications of this folly were publicized worldwide by the childish tantrums and humiliating lack of economic knowledge displayed by all major actors in the debt ceiling debate  that took place on a world-wide stage through a period of three excruciatingly painful months.

The world well knows that budget cuts of $2.1 trillion problematic dollars spread over ten long years amounts to a non- response to a U.S. federal debt present value of some $100 trillion.  S & P has simply reflected that reality. The sad truth is that the United States – as a consequence of its Constitution – is now locked into an 18-month policy paralysis, during which interest rates will rise, economic growth will be throttled and inflation will rear its ugly head.

In a parliamentary system, the government would collapse and new elections would be called. In the United States, no such reaction is allowed. The honorable reaction to news as devastating for the U.S. economy as that just recorded, would be for President Obama to dismiss his Treasury Secretary, Timothy Geithner, and then to resign his own position, allowing Vice President Joe Biden to succeed him.  The honorable reaction would be for Harry Reid and John Boehner to resign their leadership positions, to allow successors more suited to economic crisis and debt reduction to emerge from their respective party caucuses. Senator Mark Warner (Democrat)  and Representative Paul Ryan (Republican) would bring much-needed economic intelligence to the leadership of Congress.

But such responses are off the table in a Washington environment where inadequate political leaders stalk the Capital like Roman Emperors during the final corrupt years of Empire. For Washington has now morphed into a Rome, not of the glorious era of  Senatus Populusque Romanus- SPQR – but rather of  the last decadent era of its Imperial decline and fall:

“the greatest, perhaps, and most awful scene in the history of mankind.” Edward Gibbon, The History of  The Decline and Fall of the Roman Empire.

United States has no government; the state of nature beckons

July 30, 2011

The Founding Fathers crafted well to ensure that checks and balances limited the reach of the political system.  On the assumption that checks and balances work, government would never overreach, and debt crises would not occur. 

Unfortunately, the checks and balances have eroded over two centuries, partly as a consequence of three major wars (1860-65, 1917-18, 1941-45), partly as a consequence of three presidents prepared to violate the Constitution (Abraham Lincoln, Woodrow Wilson, and FDR), partly as a consequence of increasing rent-seeking and rent-extraction within the legislative branch, and partly as a consequence of a Supreme Court that repeatedly has mis-interpreted the Constitution. 

The result is the debt crisis now confronting the United States economy and the absence of any effective government to resolve that crisis.

When a country has no government, it essentially returns to the state of nature, where individuals fend for themselves under a law of nature. The law of nature provides individuals with a natural right to life, liberty, and property.  The rights to life and liberty are inalienable (i.e. no one morally may take away those rights nor may individuals morally voluntarily sacrifice those rights).  The right to property is imprescriptible (i.e. no one may morally seize those rights but individuals voluntarily may alienate themselves from such rights).

A state of nature is not always a terrible place to inhabit. A population accustomed to honoring the moral code will develop mechanisms for protecting their natural rights without recourse to a central government. It is a place endowed with some uncertainty and some inconvenience – individuals cannot always protect their rights against non-conforming predators.  It may well be superior to a political society that is in the final stages of internal collapse – such as the United States in the late summer of 2011.

If the non-government of the United States fails to resolve in a timely fashion  the debt crisis that it has created the People may sensibly choose to shut down their political society and to return to the state of nature that they perhaps unwisely chose to leave behind at the end of the War of Revolution in the late eighteeenth century.


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