Never mind that S&P gave their triple AAA rating to all that toxic sub-prime debt that got us into mess in the first place. Why should we trust their opinion now?
By Melvin J. Howard
S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn't do enough to address the gloomy outlook for America's finances. It downgraded long-term U.S. debt to AA+. S&P said the downgrade "reflects their opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in their view, would be necessary to stabilize the government's medium-term debt dynamics." It also blamed the weakened "effectiveness, stability, and predictability" of U.S. policymaking and political institutions at a time when challenges are mounting. A judgment flawed by a $2 trillion error speaks for itself," a Treasury representative said.
Before September 11 the firm of Cantor Fitzgerald was commonly viewed as the core of liquidity for U.S. financial markets", for the world's monetary system "Cantor Fitzgerald lost hundreds of traders and other professionals in the disaster. These individuals represented an enormous amount of intellectual capital with respect to issues affecting liquidity. Many believe that such talent cannot be easily replaced and that the United States may soon experience liquidity challenges." "Whatever happens with U.S. liquidity could have a rippling impact around the world." Cantor Fitzergald was reputedly responsible for 70% of the U.S. Bond market, at the time. It is also a key component of the 25 primary bond dealers who act as counter-parties to the Federal Reserve during its Open Market Operations. And it's one of the three of those 25 who lost many employees during the September 11th attacks. This is what the Federal Reserve does when it creates or extinguishes money by buying or selling government securities or bonds. The counter-parties to these transactions thus play a fundamental role in the monetary system. The concerns about liquidity just mentioned refer to the concern about the "flow of money" or the "accessibility of money" to conduct "business as usual" throughout the economy. The amazing feat of the remaining Cantor-Fitzgerald bond-traders to return to work within days of the tragedy is a tribute to the extraordinary resilience of the American people, and helps one understand the spirit that created such a great empire in the first place. The return to "business as usual" was also marked by the reopening of the various NY based stocked exchanges, accompanied by the speculative attacks against all those operations already critically wounded by the attacks. Free markets were back at work for the speculators who seemed to have no moral dilemmas about profiteering from the crisis. Nobody got upset about his or her lack of patriotism. But the markets are not really free for all, because when big players get in trouble the public will bail them out. But what this demonstrates is the overwhelming and disproportionate power of the shareholders, who are able to absolve themselves of the cost of this catastrophe by dropping their shares like hot potatoes, while the public steps in to pick up the tab.
They get mostly upside gain and limited downside risk. In this case it is shareholders who do not bear the responsibility of the risks they assume. With the public always standing by to fund bailouts nobody should pretend that the markets are free and fair. There is, however, one thing that the public cannot bailout, or otherwise be called upon to take responsibility for. I am talking about the value of the U.S. Dollar. If market speculators had attacked the U.S. dollar to any great extent, serious world wide financial economic troubles would have developed immediately. And no taxpayer bailout could have fixed this. We already saw from the opening of the stock markets right after the that speculators were more than willing to not let human tragedy get in the way of maximizing return on capital. So, if we have a free market for speculators, how come no speculator attack materialized on the U.S. Dollar?
I’ll tell you why a gentlemen's agreement had been reached by the world's major financial institutions to not attack the currency of the U.S. (HANDS OFF). Actually this was a good thing because it would have added massive instability to an already tense situation. However what we learn from this is a bit frightening - that the control of the lynchpin of the international monetary system is in so few hands that such a "gentlemen's agreement" can be pulled off with extraordinary success. September 11 was certainly an attack on at the heart of America and the monetary and financial systems that dominate the modern world. The fact that both the financial system and the military system were targeted on September 11th is not without significance. The two are intimately related, and key components of America’s might.
WALLSTREET THE OTHER U. S. MILITARY FORCE
But let me tell you why S&P still got it wrong yes Washington argued and waited to the last minute to get a deal done to lift the debt ceiling. Did anybody in the know think that was not going to happen? So while the world's eyes were focused on the so-called debt debate. I was looking at a spreading and global fact the dollarization of the world markets. The dollarizations have far more effect than any trade agreement. Dollarization, means making the U.S. dollar the official currency of that nation. Not only is Latin America already there, but also other lesser-known nations, are being persuaded to dollarize. At the international level dollarization take credit creation power completely out of the hands of that nation and places it entirely with the United States. With dollarization, you don’t really need the highly sometimes-controversial free trade agreements I know this first hand. Dollarization will do the job of such agreements without all the hassles and public outcries associated with these documents that have to go through a process. Such is the mystery surrounding money and monetary policy that lengthy trade agreements get more attention than the simple move to formally adopt the currency of the United States.
Dollarization gets little attention because it can happen in foreign countries without any approval of the United States government as is required for the international trade agreements. Countries that do not comply with the monetary regime will soon be attacked in their currency. In this way speculators act like a military force, going to war against foreign currencies or monetary systems, and pounding them with their might until they win. Just like the U.S. backed military forces before them they have more and mightier weapons. In the case of a military action during the cold war U.S. backed military forces could often physically attack until they gave up because the former had the most access to the most powerful weapons. The same is true of currency attacks by Wall Street firms (and their European counterparts). The major firms that instigate the speculative attacks have access to more U.S. dollars (or other hard currency such as the Euro) than the central banks of many countries. Remember that the U.S. Dollar is the linchpin of the international monetary system and forms the "reserve" backing of most foreign currencies. By having easy access to tremendous amounts of the mightiest monetary weapon in the world hard dollars. Currency speculators act like U.S. Navy Seals going behind enemy lines taking out a target undetected until it’s to late. To understand this you just have to look back into the history of the international monetary system over the past century. That’s why I rate the U.S. AAA for a long, long time to come.
