Rolling US Economy Into The Shitbin Thread

Thomas Friedman's flat world implies flat wages for equivalent work.

let's spend 20 seconds on this idea before ling out l

"Am I even here now? What week is it? I'm Tom Friedman. I was talking to a taxi driver in Dubai yesterday. He taught me more about the global economy in five minutes than any of you could ever learn in your entire lives. Here what he said: A penny saved isn't a penny earned. It's a penny learned. That's why we need to create 'thin cities' made of polycarbon sheeting and guarded by solar-powered 'green nukes'. If we don't do it, that taxi driver will. And that can never be allowed to happen."

― Tracer Hand, Wednesday, March 31, 2010 3:51 AM (4 hours ago) Bookmark Suggest Ban Permalink

michael lewis's portrayal or S&P and other ratings agency in the big short makes them out to be a bunch of clueless ignoramus chumps

oh well

Reich: "We’d all be better off had S&P done the job it was supposed to do, [during the housing bubble]. We’ve paid a hefty price for its nonfeasance."

dude u have the wrong feasance there.

it's a good thing that protecting rich asshole "job creators" from paying more taxes is more important than our national credit rating

The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

It appears that for now, new revenues have dropped down on the menu of policy options.

The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/

Fuck the S&P, Krugman sez:

On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?

Just to make it perfect, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point — then went ahead with the downgrade.

More than that, everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

yeah wondering what underlying factors are involved in this. putting my tinfoil hat on.

s&p were criminally negligent during the housing bubble . . . what i want to know is, how does them downgrading us to AA+ affect our day-to-day? is it just a symbolic gesture, or will my credit card interest rates go up etc.?

here's a good response to that

http://www.washingtonpost.com/blogs/ezra-klein/post/what-would-happen-if-us-debt-gets-downgraded/2011/08/05/gIQAx4NKxI_blog.html?wprss=ezra-klein

thanks! that's really helpful

Yeah, the US might be in a bad place, but fuck these negligent, incompetent S&P choads.

Does anyone think that the last month or so has made the US economy look more stable? Or even had no effect on it's rating? Unfortunately, capitalism is based on perceptions to some degree, and S&P's decision shapes percepeption in a (perhaps small) way, and their decision is probably more based on perceptions than specific numbers.

This downgrading is a good opportunity for poor, maligned US corporations to push that 'one-time'
Corporate Tax Holiday they've been salivating over for a while.

"This MUST be done! Look at how much the economy is hurting!"

bloomberg reports carmen reinhart, senior fellow at the (way conservative) peterson institute, is arguing the following ~

A restructuring of U.S. household debt, including debt forgiveness for low-income Americans, would be most effective in speeding economic growth, said Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics in Washington.

“Until we deal head-on with the fact that some of those debts are not ever going to be repaid, we will continue to have this shadow” over growth, Reinhart said today in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

dang

here is the point where i argue yet again for making student loan debt dischargeable in bankruptcy like other non-recourse debt.

I think it's inevitable in the longer term

the eventual devaluing of the dollar is gonna be a good thing right, means I can move to a gold mine and pay off all my debt with just a day of work

Let's all start from zero.

i keep wondering if efficiency is eventually gonna outstrip capitalism, where half the country is unemployed simply cuz they're not needed anymore.....Soylent Green ya'll

Or a pre-industrial situation, where 20-30% of the population is intermittently or always unemployed.

we already have them, they're called "retirees"

marx figured eventually we will be so efficient that we can spend all our time hunting

krugman has been so weird on the debt downgrade. like i completely agree that the rating agencies have no credibility and that their business model is corrupt, but the downgrade was based on news that's been obvious to everyone on earth who cared to pay attention. i doubt that standard and poor's seeing what everyone else sees is going to shake up markets anymore than america's terrible political system already has. the only reason i can think of that he's so worked up about it is that he sees the process of destroying the government's credit as the right's way of attacking any semblance of the welfare state and thinks that the downgrade really strengthens their hand.

krugman has been so weird on the debt downgrade. like i completely agree that the rating agencies have no credibility and that their business model is corrupt,

don't think you have to go beyond this

http://www.commondreams.org/view/2011/08/06-7

http://www.nakedcapitalism.com/2011/08/matt-stoller-standard-poor%E2%80%99s-predatory-policy-agenda.html

and from http://themoderatevoice.com/118895/sp-timeline-culpability-then-threats/ ---

http://themoderatevoice.com/wordpress-engine/files//2011/08/mcgraw-hill-theyrule-net.png

(the diagram centers on mcgraw-hill because they own s&p.)

mcgraw-hill like the same people that make textbooks??

they also publish aviation week and own j.d. power and associates

xpost

http://www.vaiden.net/quick_draw.jpg
http://www.wvah.com/programs/kingofthehill/hankhill.jpg

larry elliot's latest state of play article.

http://www.guardian.co.uk/business/2011/aug/07/global-financial-crisis-key-stages

he says we're less than halfway through a crisis that began in 2007.

And from David Harvey -

The perpetual accumulation of capital and of wealth is therefore crucially dependent upon the perpetual accumulation and expansion of debt. These two variables – accumulation of capital and the accumulation of debt – have in fact run alongside each other in the history of capitalism (go look at the data), both feeding and supporting each other. They occasionally get out of sync to create a crisis of the sort recently witnessed. What looks like a crisis of Greek sovereign debt is in fact a crisis of the financial system which arises because of a failure to find new ways to expand the surplus through reinvestment!

A startling conclusion follows. A vote against further debt creation is a vote to end capitalism! Fortunately or unfortunately (depending upon one’s political point of view) the Koch Brothers and the Republican Party cannot see that. Marx had always hoped that rebellious workers might end capitalism. So far they have not succeeded. So maybe the Koch brothers and the Republican Party can succeed where the workers have so far failed. Marx might not have been too surprised at that. As he also gleefully noted, individual capitalists operating in their own self-interest often take actions that collectively threaten the continuity of capitalism as a whole.

It is unlikely, of course, that the Republicans will stick to this crusading mission for very long. When in power their record is very different. The Reagan and Bush Jnr administrations were profligate in debt creation. (“Reagan taught us that deficits don’t matter,” famously said Vice-President Cheney). Nevertheless, short-term, the crusading Republicans may cause a lot of damage to the system they ostensibly support. As Marx also noted: the contradictions of capitalism move in mysterious ways.

http://davidharvey.org/2011/07/the-vote-to-end-capitalism/

And from a Big Picture guest blogger -

No, the issue of ability of the United States to pay its debts is unquestionable by even Standard & Poor’s. And the propensity or willingness to pay its debts, despite the recent political debate, must be assessed relative to the entire history of the Republic. The federal government of the United States has always paid its obligations – for hundreds of years.

So what’s all the fuss?

The fact of the matter amounts to nothing more or less than that a private company elected to deliver a verbal spanking to the congress, executive and – by extension – the people of the U.S. for the messiness of its political process and its confused electorate. Effectively – the S&P pronouncement last evening amounted to not much more than a guest in your house telling your children to clean up their rooms “or else.” I don’t know about you, but in my case, at least, I would ask such a guest to apologize or leave.

http://www.ritholtz.com/blog/2011/08/on-the-sp-downgrade-of-the-united-states-of-america/

Look, I know these S&P guys. Not these particular guys — I don’t know John Chambers or David Beers personally. But I know the rating agencies intimately. Back when I was an in-house lawyer for an investment bank, I had extensive interactions with all three rating agencies. We needed to get a lot of deals rated, and I was almost always involved in that process in the deals I worked on. To say that S&P analysts aren’t the sharpest tools in the drawer is a massive understatement.

Naturally, before meeting with a rating agency, we would plan out our arguments — you want to make sure you’re making your strongest arguments, that everyone is on the same page about the deal’s positive attributes, etc. With S&P, it got to the point where we were constantly saying, “that’s a good point, but is S&P smart enough to understand that argument?” I kid you not, that was a hard-constraint in our game-plan.

http://economicsofcontempt.blogspot.com/2011/08/on-s-downgrades-and-idiots.html

dow opened 200 points down. happy times!

the picture michael lewis gives in the big short is that only dunderheads wind up working at the ratings agencies. all the poindexters work for goldman sachs and j.p. morgan &c.

krugz:

Maybe there is an S&P story — but not the one you think. Arguably, that downgrade will bully policy makers into even more deflationary, contractionary policies than they would have undertaken otherwise, which has the perverse effect of making US debt more attractive, since the alternatives are worse.

what scares me the most about all this is that war mobilization was the only way out of the 1937 retrenchment

Yeah, I fear for our inability to drum up any pretext to go to war.

These days, who needs pretext? Or use of the word 'war'?

No kidding. How many people are even aware of our third war right now?

what, that little thing?

as if listening to the great financial minds at S&P opine on the creditworthiness of the US wasn't bad enough, look who's wasting valuable space in the NYT pontificating about the current financial mess.

i mean, really ... reading Henry Paulson talk about the current financial mess is like listening to David Berkowitz talk about Ted Bundy.

Seeing as almost non-existent interest rates can't be cut any more, would the Fed ever consider paying people to borrow money? It seems to me that would be highly stimulative.

war mobilization was the only way out of the 1937 retrenchment

Not the only way, but a very effective way, in that army enlistment and the draft gave 'employment' to large numbers of men who would otherwise have been filling jobs or else looking for them, plus it greatly expanded demand and put vast sums of money into circulation (much of which was sopped back up as war bonds).

But effective as it was, there's no requirement for starting a war to get the economy moving again, just as there are numerous ways to skin a cat.

the thing about that saying is i can never think of any other half-effective way besides "with a knife," basically.

i guess the only way out of this mess is knives!

How many people are even aware of our third war right now?

4th by my count

don't forget the war on christmas, too

lol