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Monday, August 8, 2011

S&P downgrades U.S. credit rating: Is anyone honestly surprised?

Is anyone honestly surprised that U.S. government's credit rating has been downgraded? Did anyone actually think they really had a AAA rating in the first place?

Any other country with our kind of debt-to-GDP ratio doesn't have that kind of rating. Anyone who honestly expects to get their money back after loaning it to the U.S. Treasury in anything but inflated and increasingly worthless reserve notes is fooling themselves.

Take whatever interest you accrue from a Treasury bond and subtract the rate of inflation from it. That's how much money you lose loaning it to the U.S. Treasury.

Would you personally loan the government money? Do you expect to get your Social Security payments back? Would you voluntarily make those payments if you had the choice?

Would real creditors, loaning actual savings from created wealth ever waste it in the U.S. Treasury without demanding a higher rate of return for their risk, or would only a government-sponsored, central bank that can print the money up at will (or just add zeros to electronic bank accounts) do that?

#MusicMonday - Fooling Yourself: Styx

Wes Messamore,
Editor in Chief, THL
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