United States' Credit Rating

A bill to lower federal spending and increase the debt ceiling is going to the Senate floor this afternoon, just in time to be passed before the government supposedly defaults on its loans. Obama has been pushing for an agreement on both sides of the aisle because it seemed to be the only option which the country had. His crack team of economic advisors told him that increasing the debt ceiling was not an option because the three credit rating agencies plan to downgrade the rating of the United States Treasury bonds if the deficit is not reduced by $4 trillion over the next ten years. However, there is absolutely no reason why the three rating agencies, Standard & Poor's, Moody's Investor Service and Fitch Ratings, should be trusted to accurately label any investment. These are private companies which get paid by investment banks based on the number of good ratings they pump out. Furthermore, they have a notoriously poor ability to rate companies correctly.

There have been numerous occasions when these rating agencies have failed to correctly do their job. One such occasion occured when the company Enron held an investment grade rating up until four days before the company went bankrupt. In July of 2008, Standard and Poor's downgraded a total of 16,381 mortgage and asset backed securities out of 31,935. These were the CDO which were responsible for the subprime mortage crisis of 2008. 466 of these downgrades went from the highest possible rating of AAA to a very low rating of speculative grade, basically calling the investments a gamble with high interest yields, but low probability of payback. If these rating agencies had been able to accurately tell investors which securities to purchase, the subprime mortgage crisis would not have been able to do so much damage to the economy.

The entire financial system is wool over the public's eyes. The United States should not have any debt whatsoever. It is a monetarily sovereign country which means that it has the power to create legal tender that others must borrow from the Treasury. Not the other way around. If the ability for the borrower to pay back the lender is what makes the debt a good investment, the United States will always have a AAA rating because it will always have the ability to create its own currency to pay off debts. The fact that credit rating agencies may have the opinion in the future that the US needs to be downgraded shows how little those agencies really understand the financial system. Their threat of an opinion should not be the reason why our Congress was pushed to pass a bill to decrease spending. In fact, criminal charges should be brought up on the credit rating agencies for blackmail. If the editor of a newspaper called Obama and told him to decrease spending or the newspaper would write an article containing reasons why Treasury bonds should not be purchased, it would be clear that criminal charges must be brought up against the newspaper editor. The fact that these ratings agencies are supposedly expert investment analysts makes absolutely no difference in how the administration should handle their threats.

Amidst Obama's financial propaganda he has forgotten to mention any of the ideas which were in his campaign speeches. There is no more talk about taxing the wealthy, providing social safety nets for those whom need it most, increasing disposable income throughout the middle class or cutting the defense budget. These used to be his economic topics, but the liar has turned about face to inform us that it is not increasing jobs which will deliver us from this recession, instead, the economy must be fixed by decreasing deficits. Apparently Obama's way of decreasing deficits is to gut social safety programs, keep corporate and wealthy tax loopholes and force austerity measures on local and state governments, thus reducing the disposable income of the middle class.

Obama claims that if the rating agencies decrease the rating of the United States Treasury bonds then the economy will be in shambles. His line of thought is that decreased debt creates investor security, and more companies will bring jobs into the country for the middle class. However, companies are investing in other countries not because of the US debt, but because there is no market with a 9.2% unemployment rate, as well as a shift from full-time jobs to part-time ones.

If Obama, his economic advisors, the House, the Senate, or any other political figure really wanted to get the economy rolling again they would not be focused on making sure private companies say something nice about the Treasury. They would focus on pumping as much money into local and state governments as possible. The time to decrease spending is not when unemployment is up, but when it is down. This is the idea behind counter-cyclical actions and pro-cyclical ones. Counter-cyclical actions are those taken by the government to reduce growth of the economy when it is growing, or increase growth when it is depressed. Pro-cyclical actions are ones taken that continue to slow down the economy if it is already slow, or grow the economy if it is growing too quickly. If someone knows they are going to lose their job in one year, they will save up as much money as they can in order to prepare themselves for the decrease in income. This is what the Treasury needs to do. It needs to save during economic booms, and spend during recessions.

Obama's demolition team of Summers and Geithner obviously missed class on the day of the pro and counter-cyclical lesson way back in Economics 201. In the late 1990s these two clowns pushed for deregulation of on investment banking. The removal of these regulations coupled with a very low interest rate at the Federal Reserve was a pro-cyclical action. The economy started going so fast that it eventually redlined in 2008. Now Summers and Geithner want to step on the brakes when the economy is going up a hill by pushing for decreased spending when unemployment is at 9.2%. They are in danger of stalling the engine. Nobody should support any politician who is in favor of pro-cyclical action such as the bill going through the Senate this afternoon.

Obama & His Demolition Team

Geithner, Obama and Summers

It is obvious that Obama and his economic demolition team are either a very crafty group of sinister individuals who work for Wall Street finance, or a completely inept group of simpletons not possessing any knowledge of basic economics. The three blind mice, Larry Summers, Timothy Geithner and Ben Bernanke, have a long history of big mistakes. However, President Obama made a bigger mistake by, not only keeping them in public administrative positions, but promoting them. This country should not believe a word that crosses their forked tongues because they have never shown a reason to be trusted.

Larry Summers made his debut under the Clinton administration. He served as Deputy Secretary of the Treasury under another financial tick by the name of Robert Rubin. Robert Rubin worked for Goldman Sachs for 26 years before he became Secretary of the Treasury. While in office Rubin spent a great deal of time voicing his opposition to the credit derivative regulations proposed by the head of the Commodity Futures Trading Commission Brooksley Born. This lack of regulation played a major role in the economic disaster of 2007. After leaving public office Rubin worked eight years for Citigroup, during which time he accrued $126 million in wages. When the position of Secretary of the Treasury opened up, Larry Summers was appointed. His economic ideas were not hard to predict. Summers was a vehement proponent of the deregulations on commercial banking, insurance and investment introduced in the Gramm-Leach-Bliley act. If this deregulatory act had not been passed it is hard to imagine any scenario where the housing bubble would have been as big as it was before it popped, if it had popped at all. This is not a man that should be anywhere near a position which would influence the economy, much less head of Obama's White House Economic Council.

The current Secretary of the Treasury, Timothy Geithner, also served in the Rubin regime. Geithner eventually worked his way up to be president of the New York Federal Reserve in 2003. He stayed in this position until heading up the Treasury. During this time the housing bubble obviously burst. Many Investors, banks, and mortgage owners lost an overwhelming amount of money because of the deregulations which he supported. The heads of these banks had lent mortgages to people which they knew would not be able to pay them back. At this point the banks sold a fair amount of that debt to investors, and insured the rest with AIG to make a profit when the homeowners went into default. Before the bubble burst these investment banks and AIG reported huge profits enabling the company to shower the executives with incredibly large bonuses. When the pop eventually rang out the money had already been made at the expense of many millions of homeowners, banks, and investors. Timothy Geithner had the New York Fed purchase this toxic debt from these banks which were supposedly too big to fail, leaving investors and homeowners alone in the cold. The direct actions of the banks which were bailed out destroyed trillions of dollars built up in the housing sector, yet Obama supposedly has faith in Geithner.

After the housing bubble burst Ben Bernanke pumped money back into the economy as head of the Federal Reserve. This money went directly to the finance sector of the economy. It raised the GDP, however it did nothing to help the homeowners or the unemployment rate. Instead, it gave banks more leverage to lend money to those very homeowners and unemployed which should have received help in the first place, thus siphoning off more wealth from the rest of the economy. Bernanke is of course still in same position.

There is no debt crisis. Timothy Geithner has the power to issue a platinum coin of any denomination through the mint, sell it to the Federal Reserve, and have that amount credited to a Treasury account. He could also explain that the way our currency is created is through debt. He knows that if the debt is lowered it will remove money from the economy which will have severe detrimental effects on the economy. He could also explain that interest rates on the debt are very low, and that the debt is not the highest it has ever been in relation to the GDP. He could explain that there is a private debt crisis devastating the economy, and that steps need to be taken to solve that problem. However, he continues to tell the country that the national debt must be lowered for the sake of economy. The real reason why he is pushing for a deficit reduction is to remove the social saftey nets which support many poor Americans. Without these social programs people will be forced to borrow more and more money, further increasing the profits of the financial sector for which he works.

Ben Bernanke also has the tools to buy Congress more time to figure out how to best solve this problem without plunging the country into ruin. The Federal Reserve is now in possession of $1.6 trillion worth of Treasury Bonds because of the recent quantitative easing program. The Federal Reserve has no reason to ever cash these bonds in because it is the facility which creates our currency in the first place. It literally has an infinite amount of money creating power. Bernanke should declare that this debt does not have to be paid back to the Federal Reserve, buying at least six more months to properly discuss monetary reform. However, Bernanke will never do this because he is also a puppet of finance. Furthermore, this will never be done because the Federal Reserve is a private organization of member banks which the United States government has no control over. This fact is apparent because it does not make any sense that one part of the government, the Treasury, would owe $1.6 trillion to another part of the government, the Federal Reserve.

Obama is also a puppet of the financial industries. His silver tongue, political party, good looks and ethnic background make him an amazing conductor of the economic symphony which his cabinet has written. When he says jump the country asks how high. Do not listen to him or his horrible team of white collar criminals about anything, especially national debt reduction. It is evident from their track record that the only thing they are out to get is money and control.

The Manufactured Debt Crisis

On July 25th a video was posted on The Real News Network. It was an interview with the creator of the website 'Naked Capitalism' and the author of the book Econned, Yves Smith. She brings up the idea that this entire 'debt crises' is being manufactured by President Obama and his cabinet to cut entitlement programs. It doesn't seem like this is a manufactured crisis, after all if a person with a credit card spends too much they cannot spend anymore, and the same principle would make sense with the National Debt. However, the National Debt and private debt are very different. The federal government has many tools in their belt to keep spending on programs that are necessary for people to survive. When this is taken into consideration, coupled with Obama's track record, it is plain to see that this really is a manufactured crisis meant to benefit financial institutions once again.

Obama's track record of being a Republican in Democratic clothing starts with the beginning of his presidency. His support of the $700 billion bailouts of financial institutions was so beneficial to banks that it is surprising that any real Democrat would ever listen to anything he had to say from that point on. A move to pay off banks because they are "too big to fail" is beyond Republican in nature, it is oligarchical. A free market Republican would have known better than to bail out a private business, because the market corrects itself. If a bank is making poor decisions it must deal with the consequences just like any other business. The banks had been lending money to people with low incomes, high incomes and bad credit scores, and even to some people with no income at all. These loans had contracts which gave the lender the power to increase the interest rates at a point in the future, sometimes by as much as 100%. If the borrower had no way of paying the loan at the beginning of the process, the lenders knew that any chance of seeing the money again from the borrower was nonexistent. However, they did know that they would see the money that was lent out because the government had bailed other businesses out which were also "too big to fail." The lenders also knew that they would scoop up the foreclosed houses in the process.

Obama, Bush, and characters like then secretary of the treasury, and former CEO of Goldman Sachs, Henry Paulson, got away with stealing from the poor and giving to the rich because the crisis was manufactured by Wall Street and the corrupt public administrators working for the financial sector. In this case manufactured means that the financial sector made a very big deal out of the crisis, which it was, but said that they must be bailed out or the economy will be devastated. Of course if the banks had failed at the government had done nothing the economy would suffer, however, there were many other options available to the president and his cabinet. This blatant lie told by finance sector executives and those public officials with their hands in the financial cookie jar is called extortion. There were other options to choose from during the subprime mortgage crisis, but none would have been so overwhelmingly beneficial to the financial sector. People's savings could have been saved even if the company went under, and other banks would shape up their lending practices in fear that it would happen to them. However, nobody ever discussed these other options, checks were immediately written.

We are now being told another lie.



Sec. of the Treasury Timothy Geithner

 The mainstream media, President, Federal Reserve Chairman, Secretary of the Treasury, members of the House and Senate, teachers at Stanford, Harvard, Princeton, Columbia and many many more sources are echoing words like reform, default, crisis and cutbacks because there is supposedly a national debt crisis. This is completely false. There are many things which could be done before August 3rd which would buy the country a few years to fix the cause of this problem. Instead Obama, his staff and the Federal Reserve boards are all calling for immediate decreases in deficits, and they make it sound like this is the only option the country has. This is of course false. The debt ceiling could be raised once more. The Federal Reserve has $1.6 trillion worth of US Treasury bonds right now. If the Fed is a part of the United States government, like we are told, there should be no debt held by it in the first place. Furthermore, if it is part of our government, the Fed should simply forgive the debt owed to them to give Congress time to come up with a proper solution. The mint also has the ability to make coins in any denomination. A $1.6 trillion coin could be minted and given to the Fed to pay off this portion of the debt.

The best option is of course to repeal, or at least amend the Federal Reserve Act to give the treasury the power to create money under congressional oversight once again. Any currency created by the treasury is debt free and could be released into the economy in a way which does not result in inflation. This would be the vital first step in monetary reform discussed in Debt Free Is The Way To Be.

It is not obvious how creating a crisis like this would benefit anyone, but with a close look and common sense motive can be seen. The debt crisis is being made into a doomsday scenario, where the only two options presented are to lower deficits by August 3rd or face drastic economic depression and government shutdown. There is a lot of pressure on Congress to get something put together by then. If a member of Congress does not vote to lower the deficit they face a scenario where they are not reelected. If the deficit is lowered it will take money directly out of the economy. For example, a cut in Social Security would mean less money in the hands of consumers over 65. This would force many seniors to borrow the money which would normally be given to them through the program. The more money that is borrowed, the more money banks make. Increased taxes would have the same result. Not only would banks benefit from a deficit reduction, but health insurance companies would too. Medicaid and Medicare reforms (cutbacks) would mean that many people would not be able to afford medical attention. Some people may want to just choose not to go to the doctors to avoid paying for insurance, however the patient protection and affordable care act may require them to purchase health insurance in the near future. Smaller federal deficits will mean greater profits for those in the financial services industries.

If one does not think that spending less and taxing more will not have drastic economic consequences, there have already been some European countries that have dealt with such consequences. Ireland faced default unless it accepted austerity measures, which is just a way to say spend less, increase taxes, or some combination of both. When the austerity measures were introduced in November of 2010, the unemployment rate was 14.4%. Hardly a time to cut spending, however they had far fewer options than the United States does now because they gave up there monetary sovereignty by going to the Euro. The same scenario recently took place in Greece. Faced with default, spending was cut and taxes increased when the unemployment rate was 15%. Any economist with common sense can tell you that these austerity measures were not the way to solve the debt problems.

Obama and other high ranking Democrats have good reason to appease the banking gods. Indeed every politician who wants to be elected has few remaining places to look for campaign contributions.