Corrupt Hypocrites

Today, one of the bond rating agencies came out and said that policy-makers need to come up with a "fiscal cliff" deal, because raising taxes and spending less (i.e. the fiscal cliff) is not acceptable. They even threatened the U.S. credit rating. They also want a deal to raise the debt ceiling ! So for the U.S., they advocate more spending and lower taxes v.s. the exact opposite, which is what will occur if policy-makers do nothing. For the European nations that are in the exact same fiscal bind, ratings agencies advocate the complete opposite - higher taxes and lower spending aka. austerity.

This is fucked up on so many different levels, I don't even know where to begin...

It's Good To Be U.S.

Obviously, the blatant double standard here is insane. This again, stems from the fact that the U.S. has the reserve currency and is therefore seen as the money printer of last resort. Leave aside that all of these ratings agencies are U.S.-based which is a major conflict of interest in and of itself. No other country has ever been told by a bond rating agency that more spending and less taxes, is better than the opposite. Every other country in the history of mankind has been told - even in  the face of economic depression - that the country needs to tighten its fiscal belt so that bond holders get paid. If a fiscal cliff (tightening) is bad for the U.S. which currently has 7.7% unemployment, because it would tip the country into recession, then why isn't it bad for Greece which currently has 26% unemployment?  During the Great Depression, the U.S. had unemployment of 25% by comparison. What more proof do we need for my assertion that America's vacation from reality is being explicitly subsidized by the rest of the world? It's officially called seignorage.

So that gets us to the next ludicrous aspect of this situation, as to why these ratings agencies would go along with this charade. It's clear, that like the bond-holding investors themselves, these ratings agencies are in no way thinking long-term about this situation. What they want to see is interest payments made now, regardless if it means borrowing new money to pay interest (Ponzi borrowing) OR if it involves monetization of debt by Central Banks.  Either way, the ratings agencies are totally on board with Extend and Pretend.

Just as it was in 2008, the entire shit show collapsed because everyone, including the bond rating agencies were getting paid to look the other way.

The Smell of Fear

Beyond the obvious corruption and hypocrisy, there is a deeper motive behind all of this.  By advocating continued borrowing, as indicated above, Fitch is essentially advocating Ponzi borrowing - because their job is not to protect the economy, it's to protect the solvency of the debt. So they are basically admitting that the U.S. can't stop borrowing and still pay interest on its debt.  Which gets to the old saying, that when you owe the bank a thousand dollars and can't pay it back then you have a problem.  If you owe the bank a million dollars, now the bank has a problem.

When it comes to the U.S., the "bank" is just starting to realize that it has a big problem.