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.
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