Low Standards, Poor Judgment
by David Atkins ("thereisnospoon")
While many left-of-center pundits and bloggers have flogged the Republicans’ key role (i.e., taking the debt ceiling hostage and refusing to raise taxes even an inch) in the Standard & Poor’s report explaining their historic downgrade of U.S. treasuries from AAA to AA+, what is more telling is that anything S&P says is taken seriously at all. I have little to add on this front to what Digby and Paul Krugman have already said, but a few key points bear repeating:- It was S&P that had Lehman Brothers rated AAA just a month before they went bankrupt.
- It was S&P that rated AIG’s credit default swaps as rock solid investments
- It was S&P that admitted to making a $2 trillion accounting error (remember, playing with numbers is their core business and reason for being) in advance of the downgrade of U.S. debt.
- A downgrade in U.S. debt means functionally that U.S. treasury bills are, in S&P’s oh-so-wise opinion, less trustworthy and a greater credit risk to investors. This comes only a day after investors fled the DOW and S&P500 into the safe and waiting hands of…you guessed it: U.S. treasuries. The same treasuries that S&P suddenly finds a more dangerous buy. So what does that say about the stock market, and the S&P500? Perhaps S&P might wish to re-evaluate the credibility of its own market index.
- None of the other ratings agencies are taking the drastic step that S&P has. S&P is all alone in their move to downgrade U.S. credit.
- When all is said and done, U.S. treasuries are still the safest investment in the world, and it would take either an idiot or someone with a strong political agenda to contend otherwise.
S&P’s credibility to make any sort of statements about anything at all is highly suspect. By all rights their failure to properly evaluate Lehman and AIG alone would mean that if the free market were doing its job, all the ratings agencies would have gone out of business or been disbanded a long time ago. It is remarkable that anyone on the left, right or center pays any attention to anything they have to say, much less that an entire nation quakes in fear of their oracular pronouncements. The Wall St. emperor was exposed as a naked fraud years ago, yet everyone still pretends that he’s clad in the finest raiments of wisdom.
The fact is that S&P, for whatever reason—be it political, economic, corrupt or some combination thereof—has desperately wanted to downgrade U.S. debt for months. First came the clearly unfeasible demand that the U.S. cut $4 trillion in spending while eliminating all the Bush tax cuts, even on the middle class. Then came the austerity bill, which was put in place over the top of a snookered public precisely to avoid a credit downgrade. Then came the threat to downgrade our credit anyway. Then came the admission of their $2 trillion accounting error in making the threat. And then came the downgrade in spite of it all. Let’s be clear: S&P was always going to make this move, no matter what we did. The austerity bill was thus an utterly pointless exercise to appease a ratings agency acting in bad faith.
But instead of learning that important lesson, our policymakers and our "liberal" media will do precisely the opposite. They will bow down and worship the ground this shoddy organization walks on, while bemoaning the supposed lack of bipartisan compromise that provided the excuse for S&P to make their pre-planned move. Then they’ll pressure Democrats to make cuts to Social Security to appease their ratings agency overlords, since everyone knows that the GOP will allow the Bush tax cuts to expire as soon as pigs start flying out of hell to escape the frozen climate. And it will be Dems' fault if they don't "compromise" for the good of the country, while any liberal who says otherwise will be told to go sit at the kids' table while the "serious" people make the decisions.
Welcome to America: funhouse mirror edition.
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