Posts Tagged ‘Standard & Poors’

Mene, Mene, Tekel, Upharsin

August 10, 2011

Walter Russel Mead is reading the handwriting on the wall. Our leadership all over the world, but especially in the four largest economies; America, Europe, Japan, and China, has been weighed in the balance and found wanting.

The world’s leaders have been on trial these last few months. In Europe, a long running currency crisis has tested the commitment of Europeans to the social ideals they so often speak of, and to the community of nations they have worked to build since the 1940s.  TEKEL: weighed in the balance and found wanting.

In China they have been on trial as the accumulating evidence suggests that corruption, incompetence and malfeasance damaged the country’s vaunted high speed rail project and led to the deaths of dozens of passengers.  TEKEL.

In Japan they have been on trial since the tsunami last spring.  Would Japan’s bureaucracy tell the truth to the public?  After a lost generation of stagnation would Japan’s government come up with an effective plan to reconstruct the north and rebuild the country’s economy?  TEKEL.

And in the United States we have a stagnant economy, a mounting debt and no real idea of the way forward.  Would Washington come up with a constructive, future-oriented program to move the economy forward and start the adjustments necessary to prepare us to live within our means – and to grow our means so it wouldn’t be hard?  TEKEL again.

Europe, China, Japan, the United States: the leaders of the world’s four largest economies are nowhere near passing the tests that history has set them.  In all four places the instincts of the politicians are the same: to dissemble, to delay, to disguise and to deny.

But it is not just in financial matters and not just the leaders. It seems that there is a dearth of vision afflicting all of us these days. No one seems to be interested in doing great things, like going to the Moon. Instead our leaders squander our money and promise high speed rails. Mead puts it far better than I ever could.

The challenges the great powers face today run much deeper.  Behind Japan’s economic problems and the pathetic inadequacy of its political leadership is a much deeper question of identity and purpose.  What is Japan’s job in the world; what does Japan have to teach and to suffer and to do?  What is the special contribution that only Japan and the Japanese can make, and how does the country prepare itself for this?  Do thousands of years of Japanese culture and philosophy culminate in a cheap consumer culture and relentless demographic decline?

It is the same thing in Europe.  The financial problems, real and dangerous as they are, proceed from a vacuum in the hearts of the European peoples.  What is it to be a German, a French person, an Italian, a Greek, a Spaniard or a Swiss?  Is it a matter of blood, belief, or of culture?  What duties do the Europeans have to one another and to the world?  When Europeans talk about their decline in the world – and it is worth talking about, since for 100 years Europe has been steadily and sometimes catastrophically in decline – they too often look at questions of imperial power or relative wealth.  But what was extraordinary about Europe 100 and 200 years ago and is largely lost now was never imperial power or economic might.  It is the cultural energy and dynamism that once made Europe the greatest font of creativity and ideas since ancient times.  The art, the music, the philosophy and the science of Europe captured the world.  Now Europe designs very nice shoes, and its Michelin starred restaurants serve quite excellent meals.

Europe’s challenge isn’t to fix the euro or to reform its pensions.  And it is not to make clunkier shoes or less appetizing meals.  Its challenge is to become Europe once more: to be as adventurous, as profound, as creative and yes as dangerous as it once was.  The core European debate should not be over the constitutional provisions of the European Union or the financial arrangements behind the euro, important as those things are.  What matters in Europe is that the younger generation wakes from the materialist, conformist affluence – deep wells of listlessness, anomie and despair concealed under whatever ephemeral cultural fads and fashionable causes drift by.  They must begin to live, to take risks, to dare, to create and to build – and, among other things, that means they (like the other affluent peoples) must start having children again.

China too has bigger fish to fry than high-speed trains.  The convulsive transformation of the biggest society in the history of the world, the sudden rise of enormous wealth cheek by jowl with poverty made worse by the alienation and dangers of urban life: all taking place in a moral vacuum where neither tradition, reason nor culture softens the harshness of oppression and injustice.  This cannot endure; the people of China are struggling blindly for some better way.  Unless China becomes great it cannot live, but by great I do not mean building a blue water navy and winning the fearful awe of its neighbors.  I mean the interior greatness that comes from disciplined talent, ambition harnessed to service, creativity addressed to the task of healing, and strengthening a people still scarred by a century of war, revolution and soul-crushing oppression at the hand of foreigners and fellow countrymen alike.  China has within it the seeds of an excellence and greatness that the world has never seen.  It can become a garden in which all the beauties and aspirations of past millennia can be fulfilled – but that requires a deeper kind of leadership than one fixed on keeping the growth pot boiling lest popular revolt overthrow the regime.

I have written before of the challenges that face us in the United States and will not say more here except that stale quibbling over expense cutbacks that will not significantly reduce the deficits, and reforms that will change very little, is not what we need.  Americans have the opportunity and the duty and the urgent pressing need to move into the future, to do and be more than ever.  The thin rhetoric of a backward looking president, the obstreperous negativism of an opposition better at rejecting what it hates than building or even conceiving what it needs, the lotus-eating educational formation that cuts us off from our past, and the incessant noise of a superficial pop culture: none of this is worthy of America at its best and none of it will help us now.

I wonder, are our days numbered and will we be divided between the Medes and the Persians?

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Attacking the Messenger

August 8, 2011

If you were expecting the Obama administration to take at least some of the blame for S&P’s downgrade of the federal government’s credit, you have a long wait. Instead they have decided to attack the messenger.

Treasury Secretary Timothy Geithner slammed Standard & Poor’s on Sunday as showing “terrible judgement” in downgrading the US credit rating for the first time ever.

“I think S&P has shown really terrible judgement and they’ve handled themselves poorly, and they have shown a stunning lack of knowledge about basic US fiscal budget math, and I think they came to exactly the wrong conclusion,” Geithner said in an interview with NBC News.

He has a point. They did show poor judgement in only lowering the rating by one notch.

If attacking Standard & Poors for being honest doesn’t work, they could try blaming the people who have been warning them and demanding fiscal sanity, the Tea Partiers.

While continuing to cast doubt on the credibility of Standard & Poor’s, several Democrats on Sunday said there is an even greater culprit in the downgrade of the nation’s credit rating: the tea party.

“I believe this is, without question, the tea party downgrade,” Sen. John F. Kerry, Massachusetts Democrat, said on NBC’s “Meet the Press” on Sunday, a day that also saw mounting anxieties in world markets over the downgrade among myriad other economic woes worldwide. Some of the world’s top financial ministers issued a joint statement Sunday night committing themselves to preserve the stability of financial markets and their economies.

David Axelrod, a former senior adviser to President Obama, used the exact same phrase in dubbing the credit rating drop the “tea party downgrade,” as Democrats tried to position themselves as reasonable, pragmatic leaders and conservative Republicans as irresponsible ideologues who caused the downgrade by refusing to accept any new taxes.

I wonder of the Journo-List has been resurrected to give the Democrats and the Media their talking points. Senator Lindsey Graham defended the Tea Party.

Sen. Lindsey Graham, South Carolina Republican, defended the tea party and said that without the movement, trillions of dollars in spending cuts wouldn’t be possible.

“Thank God they’re here,” he said on CBS’ “Face the Nation.”

“This is the first time we’ve ever raised the debt ceiling where we tried to actually reduce spending. That’s a good thing, but we’re woefully short,” he said. “The tea party hasn’t destroyed Washington. Washington was destroyed before the tea party got here. The hope is that the tea party and middle-of-the-road people can find common ground to turn this country around before we become Greece.”

He’s absolutely right. The Tea Party is not to blame for the mess we are in. The Tea Party formed because enough people around the country realized that things could not continue to go on as they have been in Washington.

Meanwhile, Micheal Moore has some advice for Obama.

Liberal firebrand Michael Moore called on President Obama to respond to the U.S. credit downgrade by arresting the leaders of the credit-ratings agencies.

On his Twitter feed Monday, the Oscar-winning film director also blamed the 2008 economic collapse on Standard & Poor’s — apparently because it and other credit-ratings agencies did not downgrade mortgage-based bonds, which encouraged the housing bubble and let it spread throughout the economy.

“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.

I am sure that will work.

Also, the stock market fell 634 points. I guess we should be getting ready for the second Great Depression.

 

U.S. Credit Downgraded

August 6, 2011

For the first time in American history, the federal government’s credit rating has been downgraded from AAA to AA+ by Standard & Poors.

Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.

“It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s government debt rating unit.

The decision came after a day of furious back-and-forth debate between the Obama administration and S&P. Treasury Department officials fought back hard, arguing that the firm’s political analysis was flawed and that it had made a numerical error in a draft of its downgrade report that overstated the deficit over 10 years by $2 trillion. Officials had reviewed the draft earlier in the day.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesman said Friday night.

The downgrade to AA+ will push the global financial markets into uncharted territory after a volatile week fueled by concerns over a worsening debt crisis in Europe and a faltering economy in the United States.

The AAA rating has made the U.S. Treasury bond one of the world’s safest investments — and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive social safety net for retirees.

Treasury bonds have also been a stalwart of stability amid the economic upheaval of the past few years. The nation has had a AAA rating for 70 years.

Analysts say that, over time, the downgrade could push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year. It could also drive up interest rates for consumers and companies seeking mortgages, credit cards and business loans.

A downgrade could also have a cascading series of effects on states and localities, including nearly all of those in the Washington metro area. These governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.

They don’t believe that we will get our finances under control and I don’t blame them. I suspect that they were either being nice or were subject to political lobbying or they would have downgraded us all the way down to junk bond status.

I think it’s official now. Obama is a worse president than Jimmy Carter. If he keeps going he’ll pass James Buchanan as the worst president in history.

In case there’s any question about whose fault this mess is, look at this graph.

Bush’s spending was bad enough but Obama’s is an order of magnitude worse.

Hope and change!!

 


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