Late Wednesday The Federal Reserve announced a new program to try to stimulate the economy so that maybe somebody, somewhere could get a new job, or maybe it's so that critics would shut-up about employment. It's always hard to tell what The Fed's real objectives are. I don't have time to explain now why it's … Continue reading The Fed’s New “Twist” – Not Likely To Help
People, businesses, and banks simply aren't investing in the sense of putting financial wealth to work in productive purposes with the intent to produce goods and thereby produce profits. Instead, folks, the ones who have financial wealth that is, are just sitting on cash. They're putting it in the bank at record low interest rates. … Continue reading Yep, This Is What A Liquidity Trap Looks Like
Both official Washington and the chattering political classes have spent most of the past 12 months debating how to cut the government budget, reduce deficits, and limit debt. Key groups, and perhaps the most vocal and strident groups in the debate, have been the self-described "constitutional conservatives" and Tea Party types. They have staked out … Continue reading Founding Fathers Would Have Opposed A Balanced Budget Amendment – The Purpose of National Government Was to Borrow
James Kwak at Baseline Scenario offers a great analogy and explanation for why the whole concept of a private rating agency such as Standard and Poor's putting a credit rating on government bonds is absurd. It adds no new information. Now if S&P wants to rate the Greater Podunk Water Authority bonds or some such, … Continue reading Why the Whole Idea of “Rating” Government Bonds is Absurd
It's Monday, Aug 9. The stock markets are declining significantly, although anybody who says it's panic doesn't remember 2008. Anyway, lots of market commentators, you know the types on cable TV news networks, are all claiming the decline is due to the S&P downgrade. They're wrong. Completely wrong as I pointed out already. But just … Continue reading How To Tell A Market Commentator Doesn’t Understand Markets or Finance or What They’re Talking About
It's now Monday morning, Aug 8. It's been roughly 60 hours since S&P downgraded the rating on U.S. government bonds. In that 60 hours the media, particularly TV talking head channels, have been breathlessly awaiting what they felt was a certain market panic on Monday. Clearly interest rates would go up they said. They were … Continue reading The Market Shrugs Off Rating Downgrade, Market Is Worried About Real Economy.
Yves Smith at Naked Capitalism (an unusually good source of very in-depth, timely commentary) offers some strong evidence and analysis of how the S&P decision to downgrade the U.S. debt stinks. I've already talked about how it's really irrelevant at the economic level and how it's not likely to change things substantially. I've also written about how … Continue reading The S and P Downgrade Decision Stinks of Politics and Corruption.
For a little fun, check out what people have been saying on Twitter about S&P's ratings and predictions throughout history at #StandardAndPoorsThroughoutHistory. My favorite: That is much too big to be a space station, must be a moon. AAA rating for Alderaan #StandardandPoorsthroughoutHistory UPDATE: From Remapping Debate:
The media and the talking heads will no doubt make a big deal about S&P downgrading the U.S. debt from AAA to AA and threatening to go to A in 6 months. But it's really nonsense. The U.S. it is not possible for a sovereign nation with it's own currency, it's own central bank, and … Continue reading S and P: Not the Best Judge of Credit-Worthiness
Yesterday after the U.S. markets closed, Standard & Poor's downgraded their credit rating on U.S. government bonds. Previously, the U.S. government had enjoyed for over 70 years the highest possible rating: AAA. Now it is "only" going to be AA+. We should note that the other two major bond-ratings agencies, Moody's and Fitch's still rate … Continue reading U.S. Government Debt Downgraded by S&P. What a Farce. And Non-Issue.