This is a continuation of a rant from before, if you haven't suffered through that yet, check it out here. Or, start at the beginning here.
So, after S&P downgraded US debt, the vaunted "markets" tanked. In fact, they had been tanking all week. They knew it was coming. But they really tanked the following Monday. Was it because S&P is so awesome, and can bring down world economies with just one report?
No, it is because our economy sucks, and because those in power have no inclination or incentive to fix it. Take this fact into account: Corporations in America are sitting on TWO TRILLION DOLLARS in cash. That's right...cash. Now, we could be taxing them, and paying down the debt, but as I said in the last post, this seems to be politically impossible right now. But you have to consider the fact that sitting on cash doesn't make you much money. If they thought they could make profit by investing the cash, even in their own stock, they would do it. They see America as a dry well.
They are not investing this cash because not enough Americans have money. With real unemployment at near 20%, not enough people have the money for their products. Without jobs, people can't buy their shit! And this is not seen by corporations as a short-term problem, or they would invest at least some of the cash. Nope, they see American as a long-term project, one that they have little interest in at the moment, if at all.
Since 2007, we have lost nearly SEVEN TRILLION dollars in home values! These are the homes that we were using as ATMs not too long ago. Those ATMs are shut down. Since our economy is based on consumer spending, at least 60% of it, anyway, we miss that equity dearly. Several economists are saying that the housing market is already in a "double-dip" recession, and it is leading the way, like last time. And if that's not bad enough, about a quarter of the nation's homes (I've heard as much as a third) are under water. That means they are worth less than what is owed on them. Unless there is real help from the government, hundreds of thousands of Americans will lose these homes, many just walking away from them. This also means that the banks, which have these loans on their current balance sheets as "okey-dokey," are dangerously undercapitalized (but still gambling in derivatives markets). This is a disaster that we are only part of the way through.
Finally, we are tapped out on just about every level. We have stretched the limit of our credit. We have lost ground in manufacturing - we don't make shit anymore, which means we can't export shit. And we are at the limit of our productivity. Since 1980, the average American man works an additional 100 hours per year. The average American woman - 200 hours. We work extremely hard as a people, and we can't work much harder. And since 1980 our earning power has stagnated, as wages have barely kept pace with inflation. And, since energy and food are not counted (comically, and sadly) in that index, we have lost ground tremendously. Especially in the last 10 years. Add in the crushing weight of medical costs, especially when compared to rival economies, and we are tapped. There are just not any extra dollars that can be squeezed out of working families any more.
As an economy - right now, and for the foreseeable future - we suck! We have a corrupted governmental system, an unbalanced economy run by corporate oligarchs, and a populace that is stretched to its limits. The private cash needed to fuel a consumer economy is largely gone from the system.
And this is why there is now a push to "reform" so many government programs. Government programs, like Social Security, Medicare and education are where there are still large pools of cash. So, when this latest deal over the debt ceiling had proposals that cut programs for the people, and also cut corporate taxes...well, that is a straight-up transfer of wealth from us to the top. And that is what's coming in the Grand Bargain that the Super Congress will bring you in November. It is the final raiding of the cupboards. The thieves have all your nice shit in their sacks already, now they are taking the canned food and six-packs as they leave through the back door.
This is why some people are shorting the USA. We are in bad shape, and it doesn't look like we are getting better soon. So why would anyone want to invest in treasuries here?
Our best friend right now is Europe and the rest of the world. Asia, right now, is the future of growth and stability. But their rapid growth, and mitigating factors like huge populations in dire poverty, make them currently less stable than the USA. And Europe is as fucked as we are in how corrupt their banking system is. The business with Greece, as an example, is a textbook case in greed, corruption and stupidity. (By the way, US banks, namely Goldman Sachs, were involved in the Greek financial catastrophe too!) Just yesterday France and Germany met to discuss how they were going to, and even if they were able to, prop up Ireland, Portugal, possibly Spain and parts of Italy too. And the Greek intervention of a couple of weeks ago may just forestall what many consider the inevitable - the bankruptcy of Greece. This could start a chain of European dominos that crash through Asia and the US too.
Get ready for a rough decade. It is already being called the "lost decade," similar to what Japan has faced since the late 1990s. Too bad we didn't elect a Democratic president, one who would fight for the working people and...
...oh yeah...never mind.
Wednesday, August 17, 2011
Tuesday, August 16, 2011
Shorting the US of A Part Two - Was S&P Correct?
(This is part two of an extended rant on the economic crisis sparked by those fuck-heads at S&P. For part one, click HERE)
As to the question of S&P...fuck no. Nothing about them is correct. But they do have some assertions that are hard to argue in the main stream media, at least the way it is framed. Their main assertion is that the United States has dysfunctional governance at its core, and therefore cannot be totally counted upon to pay its debts. I think this is bullshit, but it is hard to argue the incompetence in government, or the sheer lunacy.
The real problem is that our government is bought, lock, stock and barrel by the same corporate oligarchs that pay S&P to give their crap AAA ratings. Our government is made up of a conservative party that does whatever the corporations want, and an even worse party called the Republicans. Our government IS dysfunctional in that it no longer serves the needs of the mainstream.
Many will argue that that has been the case for time immemorial. And I won't argue with them. But I think that we are at a tipping point time where something has to give. National anger will well up soon, and already has in the form of the Tea Party. The problem is, the Tea Party is doing EXACTLY what will benefit the oligarchs. They are lunatics that are driven by racism, xenophobia and in some cases religious extremism. I see the Tea Party as the expression of white, working/middle class conservatives who feel the slipping standard of living juxtaposed with the pressure of changing demographics. The broader national culture has been changing, as has the economy. They don't like it, and they blame liberals - because Rush and Beck tell them to.
They demand a kind of nationalist purity, one based on a mythical time when you paid for everything in America with gold coin, and nobody needed help from the government. Their intransigence during this debt ceiling debate was seemingly crazy. But I thought different, I thought it was awesome.
Not awesome as in good, awesome as awe inspiring.
These crazy fuckers are a minority. The Tea Party is a minority in the Republican party, and a much smaller minority in the Congress. But they are running roughshod over the lot of them, and leaving everyone else looking weak and foolish. John Boehner can't control them, and McConnell and DeMint will do anything to curry their favor. And even worse, the Democrats are terrified of them.
Why? Why are the DEMOCRATIC members of the House, Senate and White House afraid of these lunatics. They SHOULD be a dream come true. Their radical utterances should be in every Democrat's campaign commercials. But they can't do that now...
...because their President has adopted TOO MANY OF THEIR FUCKING TALKING POINTS!
The President's constant lurching to the right has created a conventional wisdom in the media. It goes as follows: The Tea Party is on the right, Obama is on the left, and John "Boner" and John McCain are the moderates. Oh, and the Progressive Caucus, they are the radical fringe.
The problem with this is that about 80% of Americans, if polled issue by issue on the economy want what the Progressive Caucus wants. The mainstream media narrative is way outside the mainstream American reality. Americans need jobs, health care, and a little security in their old age. But the most immediate need is jobs. No legislation since the bailout packages in 2008/09 have addressed this problem.
So...S&P, fuck-heads that they are, were correct when they said we had dysfunctional government. Not for the reason they said, but it is dysfunctional to the core. The same corporate oligarchs who built and nurtured the Frankenstein monster Tea Party, now struggle to control their monster's rampage through a broken body politic.
S&P also said that revenue was needed. This is why treasuries are still so stable, even after the downgrade, because our taxes are so low! There is plenty of room, historically, to raise them. The tax cuts that Bush put through added over a TRILLION dollars to the debt. But the Republicans are stuck with a pledge to never raise taxes, and the Democrats are too afraid to push an issue that 80 fucking percent of the American public agrees with - raise taxes on the rich.
So...S&P was right about dysfunction, and may have even been correct in downgrading the US debt. I really don't know. We are not the country we used to be, and the evidence becomes clearer every day how that is true. Having said that, S&P was not the main reason for the stock market explosion last week. Why did it blow up? See part three!
As to the question of S&P...fuck no. Nothing about them is correct. But they do have some assertions that are hard to argue in the main stream media, at least the way it is framed. Their main assertion is that the United States has dysfunctional governance at its core, and therefore cannot be totally counted upon to pay its debts. I think this is bullshit, but it is hard to argue the incompetence in government, or the sheer lunacy.
The real problem is that our government is bought, lock, stock and barrel by the same corporate oligarchs that pay S&P to give their crap AAA ratings. Our government is made up of a conservative party that does whatever the corporations want, and an even worse party called the Republicans. Our government IS dysfunctional in that it no longer serves the needs of the mainstream.
Many will argue that that has been the case for time immemorial. And I won't argue with them. But I think that we are at a tipping point time where something has to give. National anger will well up soon, and already has in the form of the Tea Party. The problem is, the Tea Party is doing EXACTLY what will benefit the oligarchs. They are lunatics that are driven by racism, xenophobia and in some cases religious extremism. I see the Tea Party as the expression of white, working/middle class conservatives who feel the slipping standard of living juxtaposed with the pressure of changing demographics. The broader national culture has been changing, as has the economy. They don't like it, and they blame liberals - because Rush and Beck tell them to.
They demand a kind of nationalist purity, one based on a mythical time when you paid for everything in America with gold coin, and nobody needed help from the government. Their intransigence during this debt ceiling debate was seemingly crazy. But I thought different, I thought it was awesome.
Not awesome as in good, awesome as awe inspiring.
These crazy fuckers are a minority. The Tea Party is a minority in the Republican party, and a much smaller minority in the Congress. But they are running roughshod over the lot of them, and leaving everyone else looking weak and foolish. John Boehner can't control them, and McConnell and DeMint will do anything to curry their favor. And even worse, the Democrats are terrified of them.
Why? Why are the DEMOCRATIC members of the House, Senate and White House afraid of these lunatics. They SHOULD be a dream come true. Their radical utterances should be in every Democrat's campaign commercials. But they can't do that now...
...because their President has adopted TOO MANY OF THEIR FUCKING TALKING POINTS!
The President's constant lurching to the right has created a conventional wisdom in the media. It goes as follows: The Tea Party is on the right, Obama is on the left, and John "Boner" and John McCain are the moderates. Oh, and the Progressive Caucus, they are the radical fringe.
The problem with this is that about 80% of Americans, if polled issue by issue on the economy want what the Progressive Caucus wants. The mainstream media narrative is way outside the mainstream American reality. Americans need jobs, health care, and a little security in their old age. But the most immediate need is jobs. No legislation since the bailout packages in 2008/09 have addressed this problem.
So...S&P, fuck-heads that they are, were correct when they said we had dysfunctional government. Not for the reason they said, but it is dysfunctional to the core. The same corporate oligarchs who built and nurtured the Frankenstein monster Tea Party, now struggle to control their monster's rampage through a broken body politic.
S&P also said that revenue was needed. This is why treasuries are still so stable, even after the downgrade, because our taxes are so low! There is plenty of room, historically, to raise them. The tax cuts that Bush put through added over a TRILLION dollars to the debt. But the Republicans are stuck with a pledge to never raise taxes, and the Democrats are too afraid to push an issue that 80 fucking percent of the American public agrees with - raise taxes on the rich.
So...S&P was right about dysfunction, and may have even been correct in downgrading the US debt. I really don't know. We are not the country we used to be, and the evidence becomes clearer every day how that is true. Having said that, S&P was not the main reason for the stock market explosion last week. Why did it blow up? See part three!
Monday, August 08, 2011
Shorting the US of A Part One- S&P's Big Middle Finger
So, it has hit the fan, finally. This last weekend, the Standard and Poores rating agency downgraded the US Treasury bills and bonds from AAA to AA+. They say they didn't like the way Congress dealt with the debt ceiling debate we had most recently. They say they may downgrade further if we don't cut more spending, and soon.
Who are Standard and Poores? They are a credit rating agency. They, along with Moody's and Fitch rate different kinds of debt securities for investors. Bonds, stocks and varied financial instruments are given a grade by these agencies to let investors know how risky they are. The lower the grade, the higher the risk, and therefore - the higher the rate of return. The risk is that the security may fail altogether, and you get no return. Since there have been ratings, US securities have been AAA: the safest investment in the world.
And why did they, S&P, freak out and downgrade the good 'ol USA? Is this kind of government wrangling and fussing over fiscal matters a new thing? No. Hell no! Any student of US history knows that this argument over the full faith and credit has been going on since the founding of the country. One of the big fights in Washington's cabinet was over paying the Revolutionary War bonds.
Investors loaned the rebellious Continental Congress money to fight the British. Many of those investors were actual Americans - farmers who accepted bonds for supplies, and soldiers who accepted bonds in lieu of pay. Jefferson argued that it was the Continental Congress that issued the bonds, not the new United States under its new constitution. Therefore, the United States should not have to pay those bonds, at least not at full face value. Jefferson wanted to start with a clean slate. Hamilton argued that the US should take on the full measure of the debt. Pay every penny on the dollar, so that investors would continue to loan the new government money.
You can easily make the argument that Hamilton was right, and wish that we had some Hamiltons here today. But Jefferson knew what many text books leave out. He knew that speculators had purchased many of these bonds from poor farmers for pennies on the dollar. They said "the government will never pay, we're helping you out." Then they went to Washington and Hamilton and cried that "the government must pay, or nobody will ever trust the US again." It was a bailout for bond investors that Hamilton was arguing for, as much as the US's credit rating. Just like we recently bailed out the good friends of Standard and Poores. S&P also argues for the cutting of entitlements, which means defaulting on the bonds held by the hard-working folks of America, which is like those Revolutionary farmers who got screwed.
Standard and Poores...man, fuck those guys. The US has never, NEVER defaulted on its bonds. But they butted themselves into the argument, saying before the debt deadline of August 2nd that they wanted to see four trillion in cuts, or they might lower the bond rating. That four trillion in cuts caused some consternation in Congress should not have been news. But as they lowered the boom yet again on our economy, they said that our government was dysfunctional, and that's why (along with coming up with only 2.something trillion in cuts) they were pissed.
But that's bullshit. The horrible "Super Congress" is primed to cut at least two trillion dollars further, with automatic triggers if the committee doesn't do it itself. And, only needing one conservative Democrat to cave to Wall Street's mandates, it is almost certain that taxes will remain where they are - that it will be all, or almost all cuts and not new revenue. S&P is going to get what it says it wants.
But Fuck S&P! These Wall Street lackeys are sticking it to America. They are harming 300,000,000 of us to enrich a few bankers. Yes, bankers, who are the people that S&P works for.
It used to be that the rating agencies, like S&P, worked for investors. They were paid by fees attached to investments that you purchased, bonds, stocks or the like. Then, in the 1990s when banks were deregulated, it was decided that the investment banks, those who put the stock and bond deals together, would pay the rating agencies. So what happened then is that when S&P gave a corporate bond, or an initial public offering a low grade, the bankers would say "well, I'll go to Moody's then." The message is clear: if you want your money, give my financial products, no matter how shitty, a high grade.
This is why the geniuses at S&P gave AAA grades to the absolute pieces of shit, the mortgage derivatives, that brought down the economy and so many pension funds in 2008. They knew they were crap - hell, their banker buddies were betting against them in the derivatives market. But they kept their rating up until the day of the crash. So fuck S&P and its pronouncement about US debt - they are nothing more than an advertising agency for investment banks and their shaky products. Their grade should be given no more credence than any other utterance by someone who is always wrong.
And they have been sued, these rating agencies, for giving high grades to bad investments. The investor plaintiffs have proven in court that they misrepresented the risk because they were paid by those who sold the risk. And the courts have said: not guilty! The courts did not rule on their misrepresentation, they ruled that S&P and the others enjoyed freedom of speech under the First Amendment. So, that was their defense - we can say any crazy shit we want, and take money for it.
So these fucking rating agencies have done nothing but sell you but bullshit for over a decade. S&P is not an objective arbiter of risk, and hasn't been one for a long time, and therefore should have zero credibility. They are ad men (and women) for the criminal banksters that have already robbed us massively in 2008. They should be ignored, and then investigated by the Justice Department for their role in the 2008 swindle. Instead, they are allowed to send the markets into a panic, and butt their noses into American politics with no consequence.
So why are they sticking this middle finger up so high to the nation that has treated them so well? My guess is two-fold. One, they will further enrich their banker overlords. We will soon be paying higher interest rates on any variable mortgages left, and on all consumer debt. The nation will be paying higher interest too, and banks will be getting a piece of this. Also, banks have ensnared hundreds of cities, counties and states in "swaps," which are convoluted loans full of traps and triggers. The interest rates will skyrocket on these, further impoverishing the states and municipalities of America. Two, this is also a great way to help Mitt Romney become our next president, insuring more cuts and lower taxes. This will finish the looting of the United States.
Is it possible that S&P sees financial disaster on the horizon, and wants to make a realistic appraisal of the United State's economic position in the world? Actually, yes! It is possible, and in part three of this rant I will explain just how bad off we are. But I seriously doubt this is the case for S&P. They are skanky Wall Street whores that blow corporate debt for a percentage. When they tell us we are less credit worthy, they do it with herpes sores around their lying mouths, the herpes born from the coitus of corrupted financial institutions.
So, S&P can swivel on that middle finger. They can turn 360s until their 'roids are ragin'. Fuck Standard and Poores, like the dirty whores that they are. And fuck you, Tim Geithner, for advising our President to play footsie with these dirty, diseased Wall Street whores.
Who are Standard and Poores? They are a credit rating agency. They, along with Moody's and Fitch rate different kinds of debt securities for investors. Bonds, stocks and varied financial instruments are given a grade by these agencies to let investors know how risky they are. The lower the grade, the higher the risk, and therefore - the higher the rate of return. The risk is that the security may fail altogether, and you get no return. Since there have been ratings, US securities have been AAA: the safest investment in the world.
And why did they, S&P, freak out and downgrade the good 'ol USA? Is this kind of government wrangling and fussing over fiscal matters a new thing? No. Hell no! Any student of US history knows that this argument over the full faith and credit has been going on since the founding of the country. One of the big fights in Washington's cabinet was over paying the Revolutionary War bonds.
Investors loaned the rebellious Continental Congress money to fight the British. Many of those investors were actual Americans - farmers who accepted bonds for supplies, and soldiers who accepted bonds in lieu of pay. Jefferson argued that it was the Continental Congress that issued the bonds, not the new United States under its new constitution. Therefore, the United States should not have to pay those bonds, at least not at full face value. Jefferson wanted to start with a clean slate. Hamilton argued that the US should take on the full measure of the debt. Pay every penny on the dollar, so that investors would continue to loan the new government money.
You can easily make the argument that Hamilton was right, and wish that we had some Hamiltons here today. But Jefferson knew what many text books leave out. He knew that speculators had purchased many of these bonds from poor farmers for pennies on the dollar. They said "the government will never pay, we're helping you out." Then they went to Washington and Hamilton and cried that "the government must pay, or nobody will ever trust the US again." It was a bailout for bond investors that Hamilton was arguing for, as much as the US's credit rating. Just like we recently bailed out the good friends of Standard and Poores. S&P also argues for the cutting of entitlements, which means defaulting on the bonds held by the hard-working folks of America, which is like those Revolutionary farmers who got screwed.
Standard and Poores...man, fuck those guys. The US has never, NEVER defaulted on its bonds. But they butted themselves into the argument, saying before the debt deadline of August 2nd that they wanted to see four trillion in cuts, or they might lower the bond rating. That four trillion in cuts caused some consternation in Congress should not have been news. But as they lowered the boom yet again on our economy, they said that our government was dysfunctional, and that's why (along with coming up with only 2.something trillion in cuts) they were pissed.
But that's bullshit. The horrible "Super Congress" is primed to cut at least two trillion dollars further, with automatic triggers if the committee doesn't do it itself. And, only needing one conservative Democrat to cave to Wall Street's mandates, it is almost certain that taxes will remain where they are - that it will be all, or almost all cuts and not new revenue. S&P is going to get what it says it wants.
But Fuck S&P! These Wall Street lackeys are sticking it to America. They are harming 300,000,000 of us to enrich a few bankers. Yes, bankers, who are the people that S&P works for.
It used to be that the rating agencies, like S&P, worked for investors. They were paid by fees attached to investments that you purchased, bonds, stocks or the like. Then, in the 1990s when banks were deregulated, it was decided that the investment banks, those who put the stock and bond deals together, would pay the rating agencies. So what happened then is that when S&P gave a corporate bond, or an initial public offering a low grade, the bankers would say "well, I'll go to Moody's then." The message is clear: if you want your money, give my financial products, no matter how shitty, a high grade.
This is why the geniuses at S&P gave AAA grades to the absolute pieces of shit, the mortgage derivatives, that brought down the economy and so many pension funds in 2008. They knew they were crap - hell, their banker buddies were betting against them in the derivatives market. But they kept their rating up until the day of the crash. So fuck S&P and its pronouncement about US debt - they are nothing more than an advertising agency for investment banks and their shaky products. Their grade should be given no more credence than any other utterance by someone who is always wrong.
And they have been sued, these rating agencies, for giving high grades to bad investments. The investor plaintiffs have proven in court that they misrepresented the risk because they were paid by those who sold the risk. And the courts have said: not guilty! The courts did not rule on their misrepresentation, they ruled that S&P and the others enjoyed freedom of speech under the First Amendment. So, that was their defense - we can say any crazy shit we want, and take money for it.
So these fucking rating agencies have done nothing but sell you but bullshit for over a decade. S&P is not an objective arbiter of risk, and hasn't been one for a long time, and therefore should have zero credibility. They are ad men (and women) for the criminal banksters that have already robbed us massively in 2008. They should be ignored, and then investigated by the Justice Department for their role in the 2008 swindle. Instead, they are allowed to send the markets into a panic, and butt their noses into American politics with no consequence.
So why are they sticking this middle finger up so high to the nation that has treated them so well? My guess is two-fold. One, they will further enrich their banker overlords. We will soon be paying higher interest rates on any variable mortgages left, and on all consumer debt. The nation will be paying higher interest too, and banks will be getting a piece of this. Also, banks have ensnared hundreds of cities, counties and states in "swaps," which are convoluted loans full of traps and triggers. The interest rates will skyrocket on these, further impoverishing the states and municipalities of America. Two, this is also a great way to help Mitt Romney become our next president, insuring more cuts and lower taxes. This will finish the looting of the United States.
Is it possible that S&P sees financial disaster on the horizon, and wants to make a realistic appraisal of the United State's economic position in the world? Actually, yes! It is possible, and in part three of this rant I will explain just how bad off we are. But I seriously doubt this is the case for S&P. They are skanky Wall Street whores that blow corporate debt for a percentage. When they tell us we are less credit worthy, they do it with herpes sores around their lying mouths, the herpes born from the coitus of corrupted financial institutions.
So, S&P can swivel on that middle finger. They can turn 360s until their 'roids are ragin'. Fuck Standard and Poores, like the dirty whores that they are. And fuck you, Tim Geithner, for advising our President to play footsie with these dirty, diseased Wall Street whores.
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