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| Nodding Off... |
First, the good old US Stock Market took, as the WSJ describes, a "nose dive" after the debt ceiling was lifted. This is because the US government is going to soak up trillions more in credit before the elections in 2012. Credit that could be used by, say, state governments, business, and so on.
The stock market no doubt felt that the Congress would actually do something to fix the problem as opposed to simply prolong it. Typically the stock market falls before a big belt tightening because it anticipates what will happen. In this case the shock and awe of spending another few trillion in eighteen months was too much and it took a subsequent "nose dive". Apparently no one on Wall Street believed the Congress would be so foolish.
The second consequence of this will be that interest rates across the board will increase over time. Right now banks borrow money from the US Government at very low rates and turn around and lend that money to business at proportionately low rates. As it costs the government more to borrow with a tighter credit market so it will cost everyone else more.
Then there is the downgrade of the US Government's credit rating to double A by Standards & Poors.
The countries with triple A credit today are Australia, Austria, Canada, Denmark, Finland, France, Germany, Isle of Man, Luxembourg, Netherlands, New Zealand, Norway, Singapore, Sweden, and the UK.
The US, now with a double A rating, joins the likes of Japan, China and Spain.
Spain, along with Portugal and Italy, is interesting because in the EU its considered part of the credit problem and a likely "domino" to fall after Greece. All of these countries, like the US, have debt greater or equal to their GDP. So we're in good company.
(Sort of like a co-worker with credit card debt equal to a years salary. We've all seen it. It never ends well...)
These are the first cracks in the facade with addiction. You see it over and over on shows like "Intervention." So-and-so was a fine, upstanding citizen, but with a secret. Time goes by. Soon the cracks appear - neglecting work, responsibilities, family, what ever. Then the more serious problems, arrests, losing a job, and so on until the addictee wakes up one day in the dumpster somewhere.
So our place in world credit ratings is now moving to be on par with our place in world health care and education - mediocre.
So what's the problem here.
Why the fall from grace?
Fortunately the answers are simple.
The US has ceded its leadership in morality, in decency, and in honesty over the last 50 years. The US has also ceded its exceptionalism to be "just like everyone else." And that's exactly where we are headed.
A case in point is honesty. Today there are so many Federal criminal laws that they literally cannot be counted (see this link). Fifty years ago there was a "right" and a "wrong." If you didn't know the difference, even as a child, you were cuffed in the side of the head and not-so-subtly told you were wrong.
Today's children are a lot like savages. Ruling the parents and home childish terror (just watch any Nanny program) all the while being told how special and wonderful they are and often while receiving special treatment and rewards even for bad behavior.
"Oh, little Johnny, you're so smart and wonderful - don't worry - the laws about not doing X don't apply to you..."
So instead of little Johnny's parents controlling him the government tries - making so many laws that no one can keep track of them. Laws to control little Johnny now that he's an adult.
Parents fifty years ago wanted "a better life" for their children. Sadly they gave it to them. And the children, not seeing the value of the gift, now expect and demand a better life.
No, you are not entitled to a better life.
So, instead of dealing with reality and accepting things as they are debt is used to buy a better life.
And finally, even though we can all see what is wrong, nothing is done.
The emperor has no clothes.
Yet we pretend that he does. No where is this more apparent than on a recent segment of none other than Rush Limbaugh. I caught it in the car. He was ranting about how his grandfather and father despised the "national debt" and how he never understood it. He talked about how the recent crisis hit home for him and how he finally realized what the national debt meant (I summarize and plagiarize):
- Everything paid for by the government with debt has no value until the debt is repaid.
- We have a full year of GDP in short term debt and that's the same as a lost year of wages, income, rent, sales, everything.
- All the houses, food, clothes, cars, everything bought by the government with that borrowed money is worthless.
He was, I think in shock.
As should we all be.
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