Monday, August 8, 2011

SAR #11220

Are all economies based on lies?

Echo? Moody's again warned that the US ability to find more budget cuts by 2013 – which it says is needed to avoid another credit downgrade – is “challenging”.

Mantra: European central banks said they "will intervene very significantly" in the markets. They did not say that their intervention would do any good.

Am Bushed: Key to S&P's decision to downgrade US debt was their belief that the Bush tax cuts will remain in place "because the majority of Republicans in Congress continue to resist any measure that would raise revenues." Just so you know who deserves the credit.

Mmm Good? Will there be a muni market massacre when the downgrading of Treasuries dominoes onto the municipal bond market, forcing hundreds of downgrades?

Truisms: There is no way the USA can fix its finances without a reasonable increase in taxes. There is no way the USA can fix its finances without significant spending cuts. And there is no way the US should be slashing spending or increasing taxes right now, with the job market as weak as it is. What's a girl to do?

In the Margins: Year to year, total US employment fell by 38,000 even while the economy supposedly added 155,000 jobs. We have fewer people working, more people unemployed, and the unemployment rate goes down? The number of people with jobs in July was 139,296,000, half a percent less than in June 2009, when the recession officially ended. The unemployment rate is lower only because there are fewer people in the work force, not because anything is getting better.

Zombie - Greenspan - the Blind Wizard - was on TV Sunday, reprising his role as economic oracle by blaming everything on Italy. According to him, everything here is fine and getting better and better in every way. Wonder if they pay him union scale?

Slipshod & Posers: About those poor standards at Standard & Poor...Sub-prime MBS were good, but US Treasuries are bad? S&P and the rest of the ratings agencies not only missed seeing the bubble, they helped cause it. They gave junk MBSs AAA ratings because they were paid to do so. They slept through the Lehman Brothers collapse and missed just about every other call it was asked to make over a period of years. Makes one wonder whose water they are carrying with this downgrade. Alas, this doesn't necessarily men they are wrong now.

Baby/Bathwater: The temporary payroll tax cuts are expiring and the Republicans will not renew them - even though they supposedly love tax cuts - because it (a) comes from Obama. (b) would help the poor, not the rich, and (c) might help the economy before the 2012 election.

Clip and Save: The experts (?) now see real GDP growth at 2.5% for the second half of 2011 (which seems optimistic), with unemployment drifting up to 9.3% (which seems wildly conservative), and the employment/population ration falling to a ghastly 57.9% (which is probably accurate but hardly good news).

He Said: "In 23 of the past 24 months, lower income Americans have lost more jobs than they've gained, while more affluent Americans are gaining more jobs than they're losing. In the US, poor people are euphemistically referred to as 'the struggling middle class'.... When money equals speech, and speech equals influence, and influence drives law and public policy, there is no 'equal justice under the law'.... 'Personal responsibility' seems to only apply to the have-nots."

Spending Cuts: In seven trading days, the markets were able to subtract $4.5 trillion in potential spending from the economies of the world. The Reality Challenged Right says this will be good for economic growth.

Bigotry: We have made little progress on job creation relative to population in the last 18 months or more. The employment/population ratio fell from 63% in 2008 to 58% at the end of 2009 and is stuck there. Recovery depends on somebody persuading someone to spend something.

Slip Sliding Away: Long term (2 to 99 week) unemployment benefits are being reduced or eliminated as states react to dwindling resources. Budgetary constraints (MI & SC offer only 20 weeks and have 10.5% unemployment), preventive parsimony (IL, 25 weeks) and moral meanness (WI).

Porn O'Graph: Long and Deep.


OSR said...

Do you think that S&P, who in tandem with FNMA and Freddie Mac, facilitated the credit orgy of the last decade, really went that far of off the reservation? The elite are looking to justify QE3 to continue the wealth transfer process from the lower classes to themselves via the Treasury Dept.

Charles Kingsley Michaelson, III said...

No,OSR, I think that the downgrade was undoubtedly correct - I just think that it should have come from a more reliable source. And I'm not very comfortable with the rather detailed prescription that accompanied the downgrade. And cutting $4T over out of the 10-year increase in debt seems too modest unless the inflation rate is going to be considerable...