Ron Paul's Predictions

[BlueStreak]

"(Reuters) - The United States lost its top-tier AAA credit rating from Standard & Poor's on Friday in an unprecedented blow to the world's largest economy in the wake of a political battle that took the country to the brink of default."

We lost our AAA rating....Has it really made any difference?

No.

It's mostly politics.

Dave

[bhunter]

Originally Posted by BlueStreak

Another excellent post. The radical boom and bust cycles of past versions of capitalism were the reason for adopting the Keynesian model in the first place.

Go back, and we will learn the hard way, why the old system was rejected.
Unfortunately, that is the only way some of us learn.

Dave

Dave

Here's a non-mathematical description of Modern Monetary Theory (MMT) that underlies what David Newman is putting forth. Fiat money, fractional banking, and international trade/finance are all intertwined. Consider the problems of the EU in the context of member states not being able to print their own currency.

http://pragcap.com/resources/underst...onetary-system

Here's a snippet:

Some people claim that Modern Monetary Theorists say deficits don’t matter. That is a vast misrepresentation of MMT. No Modern Monetary Theorist would ever say such a thing. Deficits most certainly do matter. Maintaining the correct level of deficit spending is, in many ways, a balancing act performed by the government. It is best to think of the government’s maintenance of the deficit like a thermostat for the economy. When the economy is running cold the deficit can afford to be higher. When it is hot the deficit should be lower. Because there is no solvency concern in the USA (as there is in the revenue constrained European nations) the only concern is inflation or possible hyperinflation.

It’s also important to note that spending by the government must be focused on its efficiency. If spending is misdirected or misguided there is a very real possibility that this spending will simply result in higher inflation that is not offset by increased productivity. If you pay people to sit on their couches all day long there is no reason to believe why this sort of government policy will not result in long-term economic decline in the citizenry’s standard of living. Therefore, government has an incentive to promote productive output and maintain sound stewardship of its currency.
.
.
.
Why does any of this matter you ask? Because once you realize that foreigners and bonds in general do not fund our spending you begin to realize that much of what your textbook taught you about our monetary system is simply not true. A government with a monopoly supply of currency in a floating exchange rate system has no solvency risk unlike a nation such as Greece which exists in a single currency system with what is essentially a foreign central bank. A government with a monopoly supply of currency in a floating exchange rate system is never revenue constrained.

The policy implications in such a system are astronomically different – particularly for a nation suffering a balance sheet recession (as I believe we are now). So, when you hear politicians and pundits talking about the national debt and our imminent bankruptcy you can be certain that they have no idea what they are actually talking about and instead are using fear mongering tactics to promote a political perspective (one that usually involves separating the middle class from its savings).

[merrylander]

Why anyone pays attention to Standard & Poors is beyond comprehension. Are these not the same people who said that Derivatives and CDSs were Triple A, and that only because they were paid to say so.

[Charles]

Originally Posted by David Newman

Federal spending is not constrained by borrowing or taxes collected.

Now that's a fact.

Chas

[David Newman]

Originally Posted by Charles

Now that's a fact.

Chas

It's operational fact. Absolutely. It's an important piece of information to fully understand how our monetary system works. Our monetary system being a fiat currency in a sovereign nation with monopolistic control of the supply of money.

[Big_Bill]

Originally Posted by Bigerik

Cept it didn't work that way.

That is an interesting answer, but how aboult some proof ?

Saying it ain't so, without proof, is no response at all.

Bill

[David Newman]

bhunter, thanks for the link, that does a very nice job of summarizing things.

[David Newman]

Originally Posted by Big_Bill

If this were true, the United States would not have lost its AAA credit rating.
Due to concerns over our almost 15 Trillion Dollars of Debt, soon to be 15.5 Trillion Dollars in Debt, it was determined that we were not as credit worthy as other Governments. This action will cost every tax payer money, as the Government will need to pay higher interest rates for the monies that it borrowes.


(Reuters) - The United States lost its top-tier AAA credit rating from Standard & Poor's on Friday in an unprecedented blow to the world's largest economy in the wake of a political battle that took the country to the brink of default.

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficit and rising debt burden. The action is likely to eventually raise borrowing costs for the American government, companies and consumers.

"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.



Bill

It is absolutely true. The debt ceiling is a carryover from the days when we had a monetary system that would allow for insolvency. It has no usefulness other than to provide political leverage and divisiveness to both parties. The legislation surrounding debt ceilings should, IMO, be abolished immediately.

I think Erik's comment was based on all of the warnings about costing the US and borrowers more money, while in reality, interest rates have gone down, costing us less. S&P was trying to send a message and doing their own bit of grandstanding which is damn near criminal, in my estimation.

[Big_Bill]

Originally Posted by merrylander

Why anyone pays attention to Standard & Poors is beyond comprehension. Are these not the same people who said that Derivatives and CDSs were Triple A, and that only because they were paid to say so.

Yes they are merrylander,

They also were the ones that gave AAA ratings to those bundled mortgages, that are now one of the problems with our economy today.

Bill

[Bigerik]

Originally Posted by Big_Bill

That is an interesting answer, but how aboult some proof ?

Saying it ain't so, without proof, is no response at all.

Bill

Interest rates kept going down after S & P did their dirty deed. What more proof do you need?