Commentary on Political Economy

Saturday 6 August 2011

Another Comment on S&P's Downgrade of their Stupidity

Here is a reply to a friend on the Gavyn Davies Blog in the FT from a while ago:

1.        Reportjoseph belbruno | April 18 4:02pm | Permalink

@ aufsteiger - Walking and shopping in Kobe this afternoon (and what a ravishingly modern city is this! enough to test the likes of Lugano and Geneva, let me assure you!), I thought of a French equivalent for BRICs, and I found it! It reads "Balords, Raquins, Indigents et Coquins"! (I hope you like the joke.)
As you can well see from my links below, at long last most "analysts" are catching up with "reality" or, as JK Galbraith used to call it, "the march of events" and stating openly that not just "BRICs" but also the "G20" are absolutely meaningless expressions - regardless of how many "summits" and "communiques" they may schedule and reach!

The entire bagarre would be worthy of a hearty laugh, were it not for the timely intervention of Standard and Poor with their "negative outlook" on US debt. Now, if you have a creditor threatening to shoot a debtor on whose prolonged existence his very survival depends (!), then you realise the meaning of "moral hazard" and "credible threat" all at once! (I am rolling in laughter at this point.) Imagine a weather forecaster whose very survival depended on forecasting rain who actually turns around and affirms his undying faith in sunshine!

Let me explain: Standard and Poor's are doing what they are paid to do: "rating sovereign debt and risk". But what we see happen under our very noses (the metaphor Bill Gross used) is that the entire "foundations and meaning" of things like "sovereign debt and risk", "inflation", "asset-price bubbles" - all of these benighted "concepts from a moribund era of "economic-financial analysis" are being overturned!! Yet people insist on seeing these "realities" with the "instruments" of a bygone era, of a different world!

Just read carefully this short excerpt from the FT's current headline on S&P's downgrade:

“This certainly is a message to Washington,” said David Ader, strategist at CRT Capital. “The message is clear even though, we note, there’s are not a lot of higher rated sovereigns to invest your money.”

Do you get it? (I ask once more) Do you get this?.... "Even though there is not a lot higher rated sovereigns to invest your money"!!

Indeed, there is even less sovereign debt that has got a STATE with the military and political power of the United States of America!! THIS is why "philosophy" is so important in this game! Because "economics" involves a lot of "philosophy", even before it involves a lot of "politics"! And those who refuse to face this "reality" will never be able to understand, let alone "com-prehend" what is happening all around them! Here is the link to that FT headline story. Cheers.

PS: This downgrade, incidentally - and I will try to draw out the implications by and by -, vindicates everything I have been preaching for a while: this is the "come-uppance" that the mercantilist capitalist countries deserve: this will blow from eye to eye the fact that the capitalist world market needs "a state of last resort", even before it has a reserve currency and a "lender of first resort" in the Fed! Ciao.

No comments:

Post a Comment