Man, does Tom Tomorrow nail "Debtpocalypse"! And James Surowiecki adds useful notes in "The New Yorker"

Debtpocalypse deferred!

by Tom Tomorrow

[Don't forget to click to enlarge.]

" Austerity during an economic slowdown isn't just bad for the unemployed. It's also bad for business."

-- The New Yorker's James Surowiecki, on his "Financial

Page" this week (Aug. 15 & 22), "The Business of Austerity"

by Ken



And the few loose ends Tom leaves are nailed down by James Surowiecki on his "Financial Page" in this week's New Yorker, "The Business of Austerity."

When Congress finally reached an agreement to lift the debt ceiling, a week ago, many predicted that investors would react with a sigh of relief. After all, on the surface the deal looked good for business, allowing the U.S. to avoid defaulting on its debt while preserving corporate tax loopholes and avoiding a tax hike for the wealthy. And it was a clear victory for congressional Republicans, traditionally corporate America's best friends in Washington. (The Chamber of Commerce spent more than thirty-four million dollars in the 2010 election, almost entirely on Republican candidates.) Yet the prophesied relief rally never materialized. Instead, investors spent the week dumping stocks as fast as they could.



The debt deal alone didn't send stocks spiralling downward, obviously. But the market's plunge was largely the product of fears about the prospects for corporate profit in an increasingly weak economy, and the debt agreement amplified those fears. . . .

Pointing out that markets "tend to be spooked by uncertainty," Surowiecki makes a chilling point:

[T]he debt-ceiling agreement has increased uncertainty by making it more likely that we'll see down-to-the-wire, default-risking negotiations in the future. Senate Minority Leader Mitch McConnell was explicit about this last week, saying that there would be no more "clean" debt-ceiling increases in the future -- in other words, Republicans will keep using the threat of default as a political weapon. This approach may well be extended to bargaining over budget resolutions as well, with Republicans threatening a government shutdown unless they get what they want. If that sounds improbably reckless, consider that every Republican Presidential candidate except Jon Huntsman came out against the final debt-ceiling deal. Even if you explain this as pandering to Tea Party voters, there's no ignoring the fact that these candidates were advising congressional Republicans to let the United States default. Once games of chicken become the accepted way to resolve budget issues, the U.S. economy will become a much riskier place.

"The deal also hurts business in more concrete ways," Surowiecki writes. The spending cuts, he says,

will likely hit precisely the kind of public spending -- on infrastructure, basic research, and defense -- from which corporate America reaps great, if often unacknowledged, benefits. More important, the debt-ceiling fight made clear that, even as the economy struggles to avoid recession, no help can be expected from Washington. President Obama may be talking about the need to create jobs, but, with the advocates of austerity in charge, it's hard to see where support for any new government initiatives is going to come from. Indeed, it's possible that Republicans will block the extension of unemployment-insurance benefits and of the current payroll-tax cut. That would deliver a significant hit to the economy next year.

And Surowiecki argues provocatively that the rich aren't even being served by the imposition of austerity.

Decades ago, America's rich were a true rentier class. They got most of their income from bonds and lived off their investments, and their main priority was keeping inflation low, regardless of anything else that happened. So austerity suited them nicely. The rich of today, by contrast, get much more of their income from their jobs and from the stock market, which means that they do better when growth is strong. And, while companies have figured out how to make money even during steep downturns -- during this very weak recovery, corporate profits have rebounded strongly -- over-all corporate profits are below where they were in 2006. . . . So, while corporate America has been doing well relative to everyone else, it would be doing much better, and investors would be much happier, if growth were stronger and unemployment were lower, even if inflation and government spending were higher. Austerity during an economic slowdown isn't just bad for the unemployed. It's also bad for business.

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There's just one thing I want to say about S&P's bond-rating downgrade -- then I'll turn the floor over to Andy Borowitz and Ian Welsh

Treasury Secretary Timothy Geithner, explaining his decision to hold onto his current post: “I didn’t want to look for a job -- it’s fucking scary out there.” (See "Bonus Andy" below.)

BOROWITZ REPORT



Predator Drone Seen Hovering over Standard & Poor’s Headquarters

Company Could Be in for Downgrade of its Own, Experts Say



WASHINGTON (The Borowitz Report) -– Just days after downgrading the credit rating of the United States, Standard & Poor’s was on high alert this morning after an unmanned Predator drone was seen hovering over its headquarters in lower Manhattan.



While the mission of the Predator was unclear, some insiders speculated that S & P might be in for a downgrade of its own.



The Predator appeared in the skies above the company's headquarters minutes after it was rumored that S & P was about to downgrade the United States to the same status as Pluto.



As a so-called "dwarf nation," the U.S. would no longer be accorded the same respect as a recognized country like France or Brazil, one S & P source said: "Basically, the United States would be considered a social network with parking."



At the White House, President Obama offered no comment on the Predator’s mission, saying only, “The Predator is an effective weapon against the enemies of the United States of America.”



He did offer apologies for what he called “an accidental Predator missile strike” over the weekend at a golf course in Virginia which narrowly missed Rep. Eric Cantor (R-VA).

by Ken



So, on the first day of trading after the Standard & Poors U.S. bond downgrade, "Stock market plummets after historic downgrade of U.S. credit rating" -- a 5.6 percent drop, Wall Street's "worst day of trading since the 2008 financial crisis as investors reacted to the historic downgrade of U.S. credit by selling so heavy that it wiped out $1.2 trillion of stock market wealth Monday."



There are a number of things that could be said about the bond downgrade, most of them silly -- and there's been no shortage of people saying them. I have just one point to make. For how long now has the Tools of the Oligarchy Right been warning that all sorts of catastrophic mayhem will result from our catastrophic debt catastrophe, including the collapse of the financial markets. The chief threat always has been that the bond market will punish us for our fiscal recklessness. And for how long have people like Paul Krugman been pointing out that bond interest rates showed no sign of going up, that apparently the dreaded bond market had no shortage of confidence in the U.S.'s financial stability. Bond buyers were only too happy to buy all the treasuries put on sale, at historically low interest rates.



This has to have driven the Pete Peterson Doom Via Debt prognosticators absolutely batty. Here they were trying to scare the bejeezus out of us with their phony-baloney "crisis," and the damned bond buyers were too dense to provide the chills the plutocrats' doom scenario called for.



Well, glory be, the bond buyers have suddenly had their confidence shaken, and bond interest rates will go up -- meaning that the bond-buying oligarchs not only have the "crisis of confidence" they've been threatening, but some nice new profits too!



Now here's Ian Welsh's take:

Comments on the S&P Downgrade



by Ian Welsh



Aside from hysterical laughter, here are the key points:



1. Obviously the US isn’t even close to insolvent. The gold in Fort Knox is held on the books at $37/ounce, for example. Most Federal lands are held on the books at 19th century valuations. Not to mention that the US’s debt is denominated in its own currency, which means it could simply be printed, and that the US government has a lot of unused room to tax, should it ever deign to use that on people with money, as opposed to those without.



2. As everyone is pointing out, the idea that S&P, who rated all the subprime trash as AAA, has any credibility, is a joke.



3. However, Obama and Democrats refused to destroy S&P when they had the opportunity and every reason to do so. The submprime crisis could not have been nearly as bad without S&P and the other rating’s agencies rating trash AAA so that investors who must buy AAA by law could do so. To put it simply, S&P engaged in systematic fraud. They, like everyone on Wall Street and in the major banks, have not been indicted for this. The choice to not indict is policy. Obama’s policy.



4. If Obama did not want this to happen, it would not happen. Could you imagine what LBJ, Nixon or Truman (or, hell, Bush Jr.) would have done if a rating’s agency tried this? The President has the necessary tools to utterly destroy S&P and every senior analyst working for them. You could use terrorism statutes or RICO, just as two examples. Send the FBI into their offices, seize all the assets of both the company and everyone working for it, and then got through their records. I guarantee, as absolutely as the sun will rise tomorrow morning, that there is enough evidence of fraud in those records to put them away for life. In the meantime, RICO laws are used to seize all the assets of everyone involved, meaning they will be using public defenders (don’t like a bad law? Use it against real people.) When S&P informed the White House they were going to downgrade, the White House could have quietly let them know what the consequences would be.



5. The US has effectively unlimited drawing rights from the IMF. Those drawing rights mean that if any of the core economies have an AAA rating, in effect, so does the US. (ie. if Germany is AAA, so is America.)



6. S&P knows all this. They are doing this because they know the President and Congress and the real people in the oligarchy want it done. Remember, a downgrade increases rates, and that is a direct increase to their income. And they know the US can pay, they aren’t fooled by idiotic talk about a default. The US may default at some point, but that will be a political decision.



7. This is another manufactured crisis, on top of the original manufactured debt ceiling crisis. The oligarchy wants the opportunity to buy federal assets at dimes on the dollar. They believe they don’t need the poor or middle class anymore, so they are good with getting rid of SS and Medicare. And Obama is, as he always has been, onside with this.



These people, are, however, playing with fire. Just because it’s a crisis that didn’t have to happen, a crisis, that is manufactured as another looting opportunity, doesn’t mean that it won’t have real consequences.

BONUS ANDY



In today's outing, I would say that the "other" jokes appended to the Borowitz Report are actually funnier than the report.

In other financial news:



-- In an effort to find a safe haven, rattled investors fled the dollar today and moved their money into Groupons.



-- In one rare bright spot on Wall Street, manufacturers of red ink posted record profits.



-- And finally, Secretary of the Treasury Timothy Geithner explained his decision to remain at the U.S. Treasury: “I didn’t want to look for a job – it’s fucking scary out there.”

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"David Brooks Reveals He Literally Worships Money" (Jonathan Schwarz of "A Tiny Revolution")

STOP THE PRESSES: 9th Circuit panel lifts injunction that permitted DoD to continue enforcing DADT (see below)

Our Davy Brooks: Does the fact that he has a career prove that there truly aren't any disadvantages to being a functional moron?

I know I sometimes try to argue that, contrary to what you might think from observing who gets respect in our society, there actually are disadvantages to being a functional moron. That, however, would still leave the career of Our Davy Brooks -- and I mean the fact that he has a career -- unexplained. Beyond that, I don't think anything more needs to be said about this post from Jonathan Schwarz on his blog "A Tiny Revolution." -- Ken

July 06, 2011

David Brooks Reveals He Literally Worships Money

David Brooks just acknowledged that the Republican party is insane, which has caused great excitement among liberals. But no one seems to have noticed the most important thing Brooks said, which is that he actually worships money:

The members of this [GOP] movement [to default on the national debt] have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money.

Obviously there's no religious or moral tradition which considers repaying loans to be "sacred." It's almost 180 degrees the opposite: the Old Testament, New Testament and Qur'an all condemn charging interest on loans. And of course the Bible requires Jubilee years in which all debts are completely canceled.

That doesn't mean that defaulting on the U.S. national debt would be a great idea. It just means that Brooks is, ethically-speaking, a gigantic pervert.

On the other hand, it turns out there's a particular kind of U.S. debt that David Brooks feels is completely unsacred:

BROOKS: There is no Social Security trust fund there.

And:

BROOKS: We all bow down and worship at the beast of this fiction called the Social Security trust fund...

And:

BROOKS: ... the trust fund is an accounting fiction.

What's the difference between these two kinds of debt? Well, David Brooks himself undoubtably owns a lot of standard government bonds. Paying him back is sacred. But the Social Security debt is mostly owed to peons. So paying them back is profane.

-- Jonathan Schwarz

POSTSCRIPT: DOES OUR DAVY HAVE A POINT?

An exceptionally erudite colleague points out that "many religious traditions do, in fact, involve themselves with borrowing and lending, dating back as far as written records," which he says often actually document temple loans in barley and silver, with gods listed as creditors and wars fought over collection of such debts. Even my learned colleague acknowledges, though, though, that officially at least this is not the case in the monotheistic religions, possibly in response to the abuses noted in such cultures as the Sumerian. (And I'm guessing that when Our Davy invokes the "sacred," he has a pretty limited version of same in mind.)

He suggests that, while "maybe Brooks is right," the point to stress is that "the US is not a theocracy, legally at any rate." He points out too that it's worth stressing who it is threatening to not live up to U.S. debt obligations: the Republicans.


STOP THE PRESSES: IN THE WAKE OF FRIDAY'S DOJ FILING,
9TH CIRCUIT PANEL RESTORES BAN ON DADT ENFORCEMENT

This statement comes from Jon W. Davidson, legal director of Lambda Legal in Los Angeles:

The injunction issued by the district court in the Log Cabin Republicans' challenge to Don't Ask, Don't Tell is back in effect. The government is enjoined from enforcing DADT anywhere in the world -- that means, not only no more discharges, but also no more processing for discharge of those who might violate DADT.

This, of course, was the situation that existed for 8 days, before a different set of Ninth Circuit judges issued the stay of the injunction in the Log Cabin Republicans case. Nonetheless, this is a quite stunning development. It shows just how important it is that the Department of Justice now recognizes that sexual orientation discrimination should be presumed to be unconstitutional and that courts should examine such discrimination carefully, as the Department of Justice forcefully argued in its brief filed last Friday in our Golinski case, which today's Ninth Circuit order expressly referenced.

But, how safe it is to come out depends on what happens next. The government could ask the Ninth Circuit judges who just lifted the stay to reimpose it while they ask a larger group of Ninth Circuit judges to again issue a stay or while they ask the Supreme Court to reimpose the stay. Even if the 3 Ninth Circuit judges who just lifted the stay refuse to do that, the government could ask the larger group of Ninth Circuit judges or the Supreme Court to reimpose the stay.

Jon W. Davidson
Legal Director
Lambda Legal

For more information on today's DADT development, check out Chris Geidner's Metro Weekly blogpost, "Ninth Circuit Halts DADT Enforcement, Pentagon 'Taking Immediate Steps' To Comply."

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