Tuesday, July 13, 2010

Credit rating chickens coming home to roost in the good old USA.

A chinese bond rating firm with aspirations of replacing Moody’s, Fitch, etc
just announced a reduction in our bond rating from AAA down to AA, dropping
us from #1 all the way down to #13 among the world’s governments. That’s AA
with a negative outlook.

This should be no surprise to people. China’s central bank already warned us
that they wouldn’t tolerate any fiscal policies that would damage their treasury
holdings. I seem to recall even talk of a “nuclear option” if we damaged their
dollar holdings value due to our policies. Nuclear in the sense of what would
be considered total financial warfare.

I found it interesting where the announcement was held. No way it would be made
there unless it was approved by the highest levels of the government there.

Yes, the chickens are flapping their wings, roosters are crowing up a storm! Daybreak
in America! The chinese people have long memories and a long history of civilization.
They also sometimes signal their intentions indirectly, such as Chou-enlai , sorry if
I misspelled the name, speaking with intermediary countries as Macarthur sent his
troops toward the Yalu, warning us to go no farther, our government, tone deaf, kept
advancing, and hundreds of thousands of chinese army troops under the element of total surprise almost booted us off the Korean peninsula. Fortunately, our brave
marines and soldiers under horrendous weather conditions, with help from our overwhelming air superiority, saved us from disaster.

Now we have a chinese bond rating company, Dagong Credit Rating Agency, making this
announcement from the main propaganda headquarters, kind of brings back memories
of looking at who was standing atop the Kremlin reviewing the troops on May Day. This
was not by chance, and this signal couldn’t be any clearer from China. The good
old days of dollar supremacy are over. This is the beginning of the end of our
dollar hegemony. You heard it first hear on the backporch, don’t forget who told
you. China is signaling no more business as usual.

I have no idea how long this will play out, I don’t think anybody does. But I do believe
China watched how our rating agencies gave AAA ratings to mortgage backed securities,
”securities not worth the paper they were printed on”, full of no credit check, no documentation borrowers, people without a pot to piss in, but plenty of windows
to throw it out of, securities that rained down havoc on investment portfolios
world wide, almost bringing down the whole financial system of the globe.

This same federal government that allowed those rating agencies carte blanche to paper
over the abysmal quality of “investments” now has failed in policing those rating agencies
and has made no serious attempt at reforming itself. China can’t help but see that we
can’t reform ourselves so they will attempt to do it themselves, and in the process end
up passing us by.

Some will say fear not, little ones, after all the United States still controls the IMF and
the World Bank. With their money, how long do you think it’ll be before there’s a new IMF
and World Bank under Beijing’s control? Might not be a bad idea, after our profligate
debt spree, would you want to be ordered around by our creature?

We just need to face the fact that, as a nation, we are addicts. Addicted to debt, with
no 12 step program available to cure us. We don’t even acknowledge we have a
problem. We have the parties fighting over the margins, with absolutely no ability or interest
to face the problem, much less try to solve it. To paraphrase Senator Everett
Dirksen from long ago in the 60’s, a trillion dollars here, a trillion dollars there, pretty soon you’re talking about real money! The difference is he said billions, now it’s trillions.

Yes, the chinese see we can’t get our act together and even begin to get the economy
back up and running, getting our people jobs so we can buy their products, all they see
is our government handing the keys to the treasury over to the banks and investment bankers, the same crowd that brought us the housing bubble, the “hold your nose due to the stench”mortgage backed securities and cdo’s and God what else they called that
crap that Wall Street peddled the world over, they see our federal government rewarding them for their bad behavior, and setting us taxpayers and the rest of the
world economy up to fail again.

You know, maybe we should let the chinese government handle our banking
situation for us, just long enough for them to administer some justice. I guarantee
you several of the top players in this debacle would already have strapped on a
gurney inside one of their execution vans, lights out. Adios, hope you burn in hell.

Well before I get too carried away with my great dream there, did you also, speaking of
chickens coming home to roost, see where now 25.5% of all Americans now have credit
scores below 599, that’s poor, with real consequences to come? Nowadays, they run
a bureau when you apply for a lot of jobs, for insurance, for any credit purpose. It’s bad
enough that there are no jobs, but when the economy finally gets going, your credit score
may keep you unemployed. I foresee lots of additional cardboard refrigerator box condos
down on skid row.

So we have a country “living off its’ credit cards and man, you talk about a high debt-to-
income ratio” that has just been told you’re over the limit and you’re about to be cut off and
whose inhabitants, at least a quarter of all adults, have poor credit and have been cut off.
And if you recall, the bankruptcy laws have been toughened at the behest of our rulers,
the banking industry and their lobbyists and the knife was put in our backs by our own

Is this a great country or what? Some might think I am negative or unpatriotic or un-American- I’m just pointing out a simple fact- a hog wearing earrings, is just that- a hog
with questionable taste in jewelry.

This subject of bad debts is something I know a little bit about as a former bankrupt.
In my opinion, I am an expert. Our nation has to clear the books of overwhelming debt, get a fresh start, mind our own business, go back to work, and watch
our money till we get back on our feet.

Financially we’re deadmen walking. We just won’t really understand that fact until
either the foreigners quit funding our debt habit by shutting off the spigot, or the
cost to service the debt rises so high in the future due to factors such as our
credit rating being torpedoed, that it sucks all of the oxygen out of the bill paying room.

We will see who’s right. My prediction is our kids and grandkids will learn the answer first hand.

Links below:






Folks, the economists will say there are two major flaws in my argument: I am applying
the rules of a household to the government and also that I am ignoring the fact that govern-
ments can print money.

My response is maybe we should apply pay as you go household budgeting as what we have sure doesn’t seem to be working or responsible and as far as printing money goes,
that is based on the full faith and credit of our government. I think most are starting to see that many have lost faith in our government even attempting to make a real budget to pay
back these trillions spent and as we can see, the credit part has one foot in the boneyard
and one foot on a banana peel.

Besides, economists mostly didn’t even know we even had a housing bubble or that it would crash, let along the whole global financial system almost taking a dive.

Sometimes people can’t see past the end of their noses or past their mathematical models
and spreadsheets.

The backporch- certified by Morongobill to be 100% math model free!Spreadsheet free!