Get Ready for Another Credit Downgrade

Thursday, 11 Aug 2011 08:11 AM

By Chris Freind

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On any given day, millions flock to America’s beaches. Yet because there have been 50 cases over the last decade of people digging deep holes being trapped by sand cave-ins, there is a renewed call to outlaw digging holes at the beach. Some towns have already done so and others are following suit.

It’s such a “serious risk” that the Los Angeles lifeguard chief, when asked by a reporter what advice he would give parents, replied, “Don’t let your kids dig holes.”

Fifty cases out of millions is insignificant — and that’s just the equivalent of one beach-going day. Now extend that out over 10 years, and we’re talking about creating laws to ban an activity that had negative results for only 50 out of literally billions of beach trips.

Given that this warped mentality is now the norm, it’s no surprise that Congress just passed a horrendously bad debt-ceiling deal which will only exacerbate our financial problems.

Nothing could be further from the truth.

So what do passing ridiculous laws and debt deals have in common? Both ignore the real problems because of bury-your-head-in-the-sand thinking. Bad decisions are rationalized in a paternalistic, group-think way, accomplishing nothing, but providing decision-makers with a false sense of feeling good.

So why don’t our leaders focus on the real problems instead of passing do-nothing regulations that only hinder law-abiding folks using common sense?

Because it’s the easy way out.

Welcome to the M.O. of the United States Congress.

Let’s look past the rhetoric and ponder the real implications of the debt deal heralded as “necessary” to save America:
  • If everyone in Washington agreed that the high national debt was bad, then how could those same folks raise it? It’s like locking an alcoholic in a liquor store and expecting sobriety. If debt was the problem, then raising it, by definition, would only make the problem worse. Go figure.
  • How can Congress be expected to solve the nation’s educational failures when its own basic math skills don’t make the grade? So to cut $2 trillion in spending, the solution is to add $2 trillion to the debt? Hmmm.
  • A number of Republican congressmen voted for the debt deal so that small business wouldn’t be hurt and to avoid a credit downgrade. Now, they get the worst of both worlds. As any high schooler could have told you, the downgrade was coming since the cuts weren’t nearly enough. And now faith in America takes a hit, interest rates and inflation will rise, and the markets will freefall. Yep, those things really serve the interests of small business.
  • Who exactly is going to buy the additional trillions of debt? Sure, there will be foreign nations and fund managers, but there simply isn’t enough money out there to buy that much debt. And don’t look to China, since they aren’t exactly thrilled with the way things are going. They’re nervously watching their U.S. debtholdings, and don’t want to be holding a worthless bag of goods as the dollar continues to plummet. They were cutting back on U.S. Treasurys well before this current fiasco.
Most significantly, does anyone really know what a trillion is, let alone 17?

To give the debt increase some perspective, we have just given ourselves the green light to borrow more than the twice the entire economic output of Texas, currently the most productive state in terms of attracting residents and beating the recession.

For that matter, the debt increase is greater that the GDP of all but four countries — just the increase!

Truth is, America’s credit rating should have been downgraded quite some time ago, so it is a mathematical certainty that it will happen again. And regarding the argument that raising the debt was necessary to avoid default, that’s Washintgton-speak, plain and simple.

There were numerous ways to pay the nation’s bills while not increasing the debt ceiling. Don’t get hypnotized by the “complexities” foisted upon us by a Congress — both Parties — with an insatiable appetite to spend.

They could have fixed the problem. They chose not to. And the beauty of it all, at least from Congress’ perspective, is that they got what they wanted: more money now, and down-the-road reductions that can, and will, be ignored by future Congresses.

So what happens? Given our unprecedented situation, no one really knows, but it’s not good.

The West is experiencing its financial bankruptcy in large part because of its spiritual bankruptcy, and until that changes, don’t expect things to “get back to normal.” But there is one measure of preparedness that will undoubtedly come in handy as the economic storm worsens: when at your foreign owned service station, learn to ask for your Middle Eastern-derived gasoline in Chinese.

An accredited member of the media, Chris Friend is an independent columnist, television commentator, and investigative reporter who operates his own news bureau, www.FreindlyFireZone.com. He can be reached at CF@FreindlyFireZone.com


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