Bob Owens

The saddest truth in politics is that people get the leaders they deserve

Downgraded. Again.

Written By: Bob - Sep• 14•12

Driven into another downgrade: “King Putt” has spent more than 600 hours on the golf course during his Presidency, and just 400 hours in meetings about discussing his failed Keynesian economic policies.

No other President has presided over a downgrade of the United States’ credit rating.  Under Barack Obama’s economic policies, our credit rating has now been downgraded twice:

Ratings firm Egan-Jones cut its credit rating on the U.S. government to “AA-” from “AA,” citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality.

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.’s real gross domestic product, but reduces the value of the dollar.

Barack Obama refuses to release his college transcripts. Is it because he never took economics, or because he failed the course as he has in the real world?

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3 Comments

  1. Steven says:

    1. What very few are talking about – even on conservative blogs are the effects of QE1 & QE2.
    I am not an expert in economics, but I can do basic freaking math. If I get some facts wrong …. hey, I can take correction with aplomb.

    QE1 & QE2 were a long term DISASTER – but especially for those who have saved money.

    Look, it’s simple: The Fed created, out of thin air, or the ether if you prefer, a CRAP LOAD of money. Now, when you put more money into circulation, what happens to the value of the money already out there? It’s worth LESS. How does this effect a citizen and our gov’t.

    #######@@@@@@

    For gov’t:

    It’s great – they have created a ton of money which despite there now being more, the inflationary effect is felt “down the line” as the banks that buy the notes. So the notes the gov’t create have full value at the time they are sold – and as the money goes into circulation the value of each dollar loses buying power. But, again, gov’t, who creates the notes gets the initial full value.
    It is illegal for the gov’t to just “print money” and spend it, so the Fed acts as a middle man. They “print” the money, and loan it to our gov’t at prime interest rate + a % or so. The banks just got paid, and our gov’t got “free money” – but you and I just got screwed. How? See our next item:

    #######@@@@@@@@

    What this does to seniors or those that have saved:

    Now, the value of all those dollars saved has “magically” devalued. All those years of saving and compound interest just went freaking “poof” and part of that value will never be recovered. They ONLY way to recover that value would be for us to be running a surplus, that magically politicians won’t spend, for that money to be brought in and then (electronically) burned, thus decreasing the amount of currency in circulation, thus raising the value of each dollar each citizen holds.

    Yea – and unicorns will be flying out of my butt any second now.

    ####@@@@@@

    What this does for every other citizen:

    Commodities on the world market are traded in dollars. Oil, gold, timber, titanium, coffee & even frozen concentrated orange juice (sorry, movie reference).

    As the dollar is the reserve currency and the bench mark currency, when we “print” more money, the value of our dollar, as measured against every commodity drops. We print 10% more money and a $100 barrel of oil now costs $110.

    Since all countries use the dollar as the benchmark trading currency all countries must hold a certain amount of dollars (that can be leveraged) in order to say each order of each commodity is bought with the benchmark currency: dollars.

    As we “print” money and as it is released over time by the banks, as in bought notes / bonds, the trickle effect is that each dollar is worth less. Which is one of the prime factors in why oil, and every other commodity (food esp) is going up. They’re relative value has not increased, per se, but relative to the dollar (of which more are now in circulation) they have.

    Again – the ONLY way to re-value the dollar to make people’s saved pensions have full value again, or for the dollar to be stronger vs. commodity price, would be to run a surplus and to “burn” the excess (electronic) money.

    Anyone truly believe politicians are going to see $200 billion dollars just sitting there and decide that the value of people’s retirement funds/savings are worth more than “the good they can do” (read: dependencies they can create or re-election they can win) ? Really? Seriously? Meanwhile, back at camp reality …

    @@@@@@#######

    The REAL nightmare:

    As the dollar is the benchmark & reserve currency it means other countries have tied their well being to our currency. They hold a TON of our currency in their reserves. I mean like low to mid double digits %-wise of the total dollar currency out there.

    Now imagine we keep printing money or do other things that are so blatantly stupid as to shake the confidence in our currency being the bed rock. What would you do if your blue chip stock you bought was suddenly being run by some maniac who devalued the worth of his/her own company, was throwing crazy parties, and acting as if they thought a business model was some size 0 “Project Runway” ass model they could screw and not a sound financial plan to be followed?

    You might dump that stock, or you might not, as certainly things could turn around, but you would probably be wise to diversify your portfolio. And suppose thousands of other investors did the same. That’s called a trend. And because people see this trend and don’t want to take a bath, the value of that stock, during this “run on the stock” (seeing where I am going yet?), caused a partial crash for that company.

    We Americans (many Americans) live in this Nickelodeon fantasy that this cannot happen.

    Here’s how it plays out – in a quick and dirty 1 paragraph manner. Unlike when the banks bought all the notes the Fed just “printed” up out of the ether, wherein they sold those notes slowly and judiciously so as not to cause a run on the dollar – all those countries who hold TRILLIONS of our dollars in their reserves, as the bench mark currency with which to buy commodities (among other things), the first few countries who sell part of their reserves of dollars get full value. They are sold on the currency market. But, then after a few countries do this, it is entirely possible that an avalanche of others start to do this too. And instead of a gradual guided decline in real value, as was mentioned above, you get a plummet in the value of the dollar. And the last idiot still holding a ton of dollars as their reserve takes a BATH. Poof, their dollar notes are worth %50. Within a few weeks their reserve cash just went to %50 of it’s value.

    And the shock to OUR economy, as all those dollars are dumped into the world economy is disproportionately worse than other countries. Why? Because all we have to trade on the open market IS OUR DOLLARS. Now gas prices double in the space of a few weeks, as do all imports, and all transportation costs skyrocket.

    I won’t go all doom and gloom – but this is not even “unlikely”, but only a matter of time, if we keep printing money.

    #####

    THIS is why the money people saved in their bank accounts is not allowing them to retire, but barely tiding them over. The U.S. gov’t, by printing money, STOLE 10-20% of your savings over a period of 2-3 years by printing / devaluing the dollar – for its’ own gain, and to our detriment.

    Oh, side note – wow, that sure would make a lot more people dependant on Social Security and safety nets. Total accident and unintended consequence … I’m sure.

    QE I and QE II were bad enough. Now Bernanke wants to do it again. Since there is no way people are going to let him just print another $500 Billion to a Trillion, what can he do? What he IS doing is printing $40 BILLION dollars a month “until things get better”.
    If I came to you, broke and a bad credit risk and asked you for $500 you would probably say, no. But imagine if I said, “Ok, how about just $40, to tide me over.” – you might say yes. But he wants an open credit line to do that AT WILL EACH MONTH.
    It’s an illusionary way to add $480 Billion to our revenue each year, and the effects felt down the line can be (and will be) blamed on “the rich”, banks, the Middle East, – anyone and everyone but the people PRINTING our MONEY into valueless nothingness.

    Hope I added to the discussion.

    Steven

  2. Michael says:

    Steven you gave a wonderful explanation of our financial predicament.The fed is the enemy of all savers in this country.

  3. Steven says:

    I had people far smarter than I take the time to explain it to me.