Listening to Michael Noonan yesterday worried me for a number of reasons. Firstly, because he’s Minister for Finance. That never strikes me as an ideal arrangement. Worse though, he sounded worried and downcast. This on the day when, at long last, it looks like we’re going to get some deal on the bank debt burden. That’s supposed to be about the best news you could possibly hope for.
If you’re a Noonan, that is. In a world where there is no choice but to force the taxpayer to reward the speculator, the best it seems we can hope for is to get the immediate liability for those bond repayments converted into a long term loan from the European Stability Mechanism (ESM), so taking away the looming danger of default. This will improve our credit rating, meaning we’ll be able to borrow the money to repay the bank debts all by ourselves. Whoopee!
Yeah. No wonder he sounds depressed.
The even less joysome part is that there is clearly going to be no write-down. Arguably in fact, the new mechanism will mean that we’ll be closing off any future possibility of burning the bondholders because now the debt will be to the ESM rather than the reckless lenders themselves. So less of a deal, more a sort of… trap.
There are good and bad arguments in favour of the fiscal compact. Well, better and worse anyway. But one stands out as being truly, shockingly, jaw-droppingly appalling: We should vote Yes because it will improve our credit rating. As if Standard and Poor and Moody and Mean don’t have enough influence.
It’s probably quite true of course; being a nice obedient populace is something they give bonus points for, no doubt. But it makes me think, why stop at voting? There’s loads more we could do to make ourselves look better credit-wise.
Stop holding those nasty unpredictable votes altogether. A country run by committee – especially a committee of appointed, imported technocrats – will be far more predictable than any democracy. Markets like that.
Execute the old. Seriously, think what that would save. And others who are a burden on the public finances too, like the mentally and the physically disabled. Or to use the more acceptable modern term, the economically disabled.
As is universally acknowledged, lenders only want to lend to you when you don’t actually need the money. Therefore we should repudiate all our debts. Including of course debts the government owes to citizens, such as pension and welfare commitments.
I only scratch the surface here I’m sure. There’s no end to what we could borrow, as long as we forget why.
Or does it mean that the criteria S&P use are arbitrary, inconsistent, and possibly reckless?
As I was saying before, there is no line that can possibly be drawn between ratings that help investors profit because they guide them accurately, and ratings that help investors profit because they influence the market favourably. So the agencies may as well say things that benefit investors. Who has S&P’s downgrade actually benefited? Well China for one. Not only can they relish the prospect of charging Americans more to lend them cash, they can now talk down to them too. According to Reuters:
“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” China’s official Xinhua news agency said in a commentary.
Xinhua scorned the United States for a “debt addiction” and “short sighted” political wrangling. China, it said, “has every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets.”
So S&P are in the pay of China? No not really. They’re in the pay of money. The rating also benefits many of America’s wealthy; a loose affiliation of the sort of people who were being given money freely under a Republican administration, now using more forcible tactics to transfer funds from the public purse into private pockets. Even, the threat of the destruction of US Federal government.
Everyone can and will blame the Tea Party – after all, if they got into power these mentalloids really would repudiate American debts. They’re internal enemies of the United States, and not ashamed to say so. But they’re not going to get into power. They are just going to be used by the Republicans, as their suicide squad.
It’s not in the interests of the Republicans or their supporters to really bring about default – not when many of them are America’s creditors. But there is nothing to stop them taking it to the brink like this to get their way again. And again, and again.