The Debt Ceiling debate, no doubt, caused S&P to speed up, seeing that D.C. has no leadership, but it is the debt itself, racked up over 40 years and accelerated under Obama, that puts U.S. in a weaker position. This 'crisis' is an opportunity for pols to seriously address total tax reform and entitlement restructuring.
As much as I hate the downgrade, it may be for the best. Someone has to force an end to escalating debt as a way of life for the goverment and the end of crony capitalism where the big corporations get every thing they want. There are no perfect solutions or perfect peopoe but, as "David Ranson puts it, the private sector, that is most often disciplined by the exacting nature of markets in its allocation of capital, is always in competition with the always wasteful federal government when it comes to access to credit."
Until the Fed/gov allows the market to go through price discovery along with relenting from crowding credit, small business is shut out. Why would a bank make a loan or savers invest in "risk on" assets when they can get guaranteed return from gov. Giant Multinational - to big to fail - Corporations bond capital with ease in this environment and further solidify their ill gotten advantage.
"And with our political class having exhibited zero willingness to enforce real cuts in spending, a government that by definition consumes and destroys capital is set to do a lot more damage. It can’t be stressed enough that there are no entrepreneurs without capital, but with politicians in both parties having revealed yet again a sneering contempt for real spending cuts, the growth capital necessary for economic expansion will continue to dwindle in amount."
"And with the weak dollar the single best way to wreck an economy for it driving limited capital into the tangible safe havens of yesterday, the economic weakness we’re now suffering promises to get worse."
All the Fed's QE does is pile money into balance sheets and create more speculators looking for bubbles to blow up, like oil and gold.
Left on their own......
"capital assets and consumer goods prices rise and fall all the time, and their fluctuations are essential for telling the markets what economic concepts should receive capital in abundance, and which ones should be starved of it."
But for many years the world has been subjected to insidious manipulation,,, by the Fed and other central banks and govs.
"Governments have no resources, so for those same governments to prop up the losers, they must by definition shackle the winners. All of this with our money."
"More to the point, governments can only prop up and stabilize the failed ideas of the past that the markets are looking to rid us of; all this with capital taken from individuals and businesses that are succeeding."
"Adam Smith once warned against stationary economies; stationary economies serving as capital repellents for the inability of the individuals who comprise them to progress. In today’s case, we have much worse. Indeed, far from stationary, our economies are moving backwards on our dime through the subsidization of that which is failing despite failure always and everywhere serving as the father of progress. If failure didn’t exist, we’d have to invent it, but governments have sought over the last four years to buy off or regulate away its existence with predictably negative results.
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