Washington, February 5, 2013 – The obvious and logical reason that a debt downgrade is unavoidable is that the US debt cannot ever be paid back, and more than likely will never stop increasing.
Any credible credit rating agency on earth would have the US debt rated as junk.
Another sure sign that another downgrade is coming is the preemptive damage control being undertaken by the US Department of Justice. They have brought suit against Standard and Poor’s, claiming that the rating agency “lied about its objectivity.”
Attorney General Eric Holder stated that “S&P’s actions caused billions in losses”, in relation to the financial crisis of 2008.
This is the same Eric holder that recently announced that bringing suit against the banks that made billions in the crash of 2008 (betting against their own products no less) were essentially above the law, as bringing suit against them would cause instability in our economy.
“Too big to fail” has become “too big to jail.”
President Obama all but ensured the downgrade today by asking congress to kick the sequester (automatic spending cuts) can down the road a few months. The goal in this delay is only to buy time to come up with a way to avoid it altogether.
This leaves Standard and Poor’s in a catch-22; if they do not downgrade the US credit rating, they will lose global credibility, as any economist besides Paul Krugman will tell you flat out that our path is not sustainable, if not terminal.
If they downgrade the US again as they did in 2011, S&P will face the wrath of the DOJ. Of course Mr. Holder says that the suit has nothing to do with the downgrade, but he also recently said that executing American citizens without charges or a trial is constitutional.
Egan-Jones credit ratings agency had recently downgraded the US debt three times, which of course resulted in an “unrelated” suit, which was recently concluded. The agency was banned from rating US debt for 18 months. That seems an odd verdict on a suit unrelated to their downgrading of the US debt.
Should S&P toe the line and not downgrade the debt, they will likely be found innocent of all charges.
To do that however would be submitting to a moral code which be devastating to the credibility of their business.
Obama has claimed his spot on the bully-pulpit (as usual) by bringing this suit before announcing his “kick-the-can” plan for any cuts to spending. While this action is only shocking to those that were surprised by the recent economy contraction, most conservatives saw it coming from a mile away.
These cuts are only reductions in increases, not actual reductions in spending for those keeping score at home.
Should S&P decide to maintain their credibility and downgrade the US, expect to hear the Obama administration rant and rave about the destructive and vindictive actions of S&P for downgrading the US in retribution for the suit.
Perfect political cover, followed by a soaring stock market and unprecedented demand for AA+ rated, never let you down, US savings bonds. The funny thing about this, is that even if downgraded, it will have no effect whatsoever on interest rates, as we are already borrowing the entirety of the deficit from the lender of last resort; You and I.
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