Dear S&P, Don’t Play Chicken With The Debt Ceiling
As Standard & Poor’s (one of the two rating agencies responsible for claiming Collateralized Debt Obligations (CDO’s) were a safe grade A investment) claims that the current level of U.S. debt is only now weakening the United State’s fiscal position, I’d like to remind readers how we got here. Note the flatness of the debt under Clinton, the rise under Bush, and the fact that the steep climb in U.S. debt starts during the beginning of the Great-Recession which also began under Bush. I’m saying this because the debt growth is nothing new… it has been like this for four years, and only now is noticed by the S&P.
Standard & Poor’s, whose great ratings of CDO’s tricked public and private retirement funds, Banks, and Nations to purchase packaged junk while believing the claim it was gold is now claiming that only at this moment in time has the U.S. debt has finally become a fiscal problem. It seems like a political play to me. I would hope that everyone who hears their claim remembers that these same ratings agencies were unable to see the largest financial crisis in the last 100 years. Their ratings actually contributed to the crisis by allowing financial institutions with strict controls on the ratings of (risk-levels) assets they could hold to purchase CDOs, causing the junk to spread and infect much more of the financial system than it otherwise might.
No doubt the U.S. debt is heading in a direction which in the long-term is untenable. But it has been for a long time. The timing of the announcement seems highly political as there will be a lot of conversation about the budget prior to 2012 and the start of another election cycle. Remember, the interests of the Standard & Poor’s agencies is tied with their clients (Banks and Financial Companies), so you can bet they wouldn’t say anything they thought might weaken that sector. Hence they contributed to one of the largest bubbles and increases in financial risk in the last century, because it was helping the financial sector go gangbusters. Now they’re entering the debate on our nations debt, do you think they have equally good intentions? So S&P contributes the the economic collapse of America. This was responsible for a decline in government revenues and the tax base, as well as the need for increased spending to strengthen the financial sector. Only now, as the budget debate looms, does S&P decide that what has been a long term trend which is finally being politically addressed has become a problem. The whole thing looks a bit suspect.
Click Here: for more on charts on the U.S. debt and deficit.