S&P STANDS FOR BODILY FUNCTIONS; FROM IN DEBT WE TRUST TO IN DEBT WE FEAR

August 9th, 2011 - by: danny

IN CASE YOU MISSED IT: Here’s the podcast of the most recent News Dissector Radio Hour on Progressive Radio Network.com Guest; Jeff Madrick, author,The Age of Greed

Do You Consent?

Naked Capitaism.com: “A new Rasmussen Reports national telephone survey finds that just 17% of Likely U.S. Voters think the federal government today has the consent of the governed. Sixty-nine percent (69%) believe the government does not have that consent. Fourteen percent (14%) are undecided.

The number of voters who feel the government has the consent of the governed – a foundational principle, contained in the Declaration of Independence – is down from 23% in early May and has fallen to its lowest level measured yet.

Raw Story: Dr Stewart, I presume

The ratings agency is Standard & Poor’s,” Stewart noted. “Who’s going to listen to a company whose name translates to ‘average and below average’?”

He explained it was “a real slap in the face” to have a worse credit rating than Finland, Australia, Singapore, and even the Isle of Man.

But the fact that investors were bailing out of the stock market and piling into U.S. Treasury bonds was the most shocking news for Stewart.

“Are you fucking serious?” he asked. “The U.S. gets downgraded so the U.S. financial institutions are flushing their money out of stocks like shit from a caffeinated goose to stash it in the safest place they can find: freshly downgraded U.S. Treasuries.”

“Basically, you burn our fucking house down and then you have the balls to come over and go, ‘Is your basement still standing? You mind if I put my money there for a little bit?’

IN DEBT WE FEAR

In 2005, I began researching the role of debt in our economy and society. The work led to the film In Debt We Trust a year later. It exposed subprime/subcrime lending and was one of a few reports at the time predicting a credit crunch and meltdown. My film was initially dismissed as alarmist but later I went from zero to hero when the markets melted down, first in 2007 and then. again, a year later.

These days we have gone from In Debt We Trust to In Debt We fear as the Dow dropped over 600 points yesterday in the aftermath of a downgrade of the American economy by the ratings agency S& P. A downgrade, it was said, the markets expected but then went beserk. The federal commission that investigated the crisis concluded in part that the ratings agencies, including S& P helped topple the system by overvaluing asetless assets with triple A Ratings.

But that didn’t stop a herd-like market from succumbing to panic and overreaction as the Washington Post recorded the damage:

“Stock markets had their worst day since the throes of the financial crisis of 2008 on the first day of trading after the historic downgrade of the U.S.’s credit rating. The Dow Jones industrial average plunged more than 5.5 percent, or about 630 points, while the S&P 500, a broader measure of stocks, fell about 6.6 percent.

Investors fled into safe investments like gold, which soared to a record high price of over $1,700 per ounce.”

Don’t the investors and market mavens know by now to distrust the ratings hustlers, don’t they know how wrong they often are?

I guess not. They didn’t want to let the facts get in the way of a mass sell-off, another sign about how the irrationality of “market psychololgy” rules the roost.Paul Krugman was out with a devastating critique of the Ratings agencies on Monday morning before the markets opened. Did some of the wise men on the street read it. Probably. Did they listen to it?

No way, Krugman told it like it is: “Let’s start with S&P’s lack of credibility. If there’s a single word that best describes the rating agency’s decision to downgrade America, it’s chutzpah – traditionally defined by the example of the young man who kills his parents, then pleads for mercy because he’s an orphan.

America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S&P, along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste.”

And then Robert Kuttner Told Us; Don’t Trust S&P

And Now this: Did S&P Break The Law?

Naked Capitalism.com: “The Administration and its allies have gone after Standard and Poor’s for its downgrade of the US bond rating to AA+. They have attacked S&P’s general competence, its failure to reexamine its decision in the light of a $2 trillion math error (a Wall Street Journal story does not reflect well on S&P’s haste) and the subjective and political basis for its judgment. Even if these attacks have merit, however, they come off as being less than convincing by virtue of sounding like sour grapes.

There is a much more straightforward basis for questioning S&P’s conduct, and it has nothing to do with how S&P arrived at its rating. There is compelling evidence that the ratings agency made selective disclosure of its downgrade decision before it made it public last Friday evening. A reader told us certain hedge funds were informed Tuesday and traded successfully on the information. A separate source had told me certain banks were briefed on Thursday and were told of the US downgrade but assured their ratings would be unaffected. On Friday morning, Twitter was alight with the news.

Disclosing news of a ratings decision is required under SEC rules to be made publicly.

Also yesterday: Mandelman told us again on Ml-Implode.com that these emperors wear no clothes and are more often wrong than right.. Did they listen to him?

“So, when it comes to today’s tele-economists, the one that seems to be the go-to-guy of late, is Mark Zandi.

Zandi is the Chief Economist at Moody’s Analytics… you remember Moody’s… the folks that got paid to slap AAA on anything that even remotely resembled a top tranche of a securitized pool of loans just a few years back. Largely because of the crackerjack work and cannot-be-bought ethics at Moody’s, the next time institutional investors will be buying MBSs and CDOs will be about the time that I’m ready to go long on a dot-com IPO with no profits and a plan to monetize eyeballs.

It seems that whenever a network is told to be more upbeat about the abysmal economic news that continues to slap our collective face, they trot feel good economist Zandi out there to babble incoherently about how the recovery of the housing market will be in full swing by the current years end, although he still sees foreclosures through the end of the following year, whichever year is coming up next. As of today, Zandi sees foreclosures through 2012.

I suppose eventually, he’ll be right.

On August 9, 2006, Zandi told Newsday that ” it will probably be three or four quarters before we see the bottom of the housing market.”

Then in late October he claimed that the housing market’s correction was in “full swing” and that it probably had another year before it would bottom out.

In March of 2007, Zandi saw a bottom in the spring or summer of that year, and he claimed that the weakness in housing was only concentrated in certain areas and that there was no evidence that the entire market was “caving in.”

But by June of 2007, Zandi couldn’t see that illusory market bottom coming until the summer of 2008… until he couldn’t see it coming until “all the way into 2009,” that is.

In September of 2007, Zandi told CNN/Money that foreclosures would peak in 2008 at about 900,000, of course that was also when Zandi was “fundamentally optimistic” that we wouldn’t see any serious number of jobs lost, and he pegged the probability of recession at about 40 percent.

Fast forward to April 2, 2009, and Zandi was telling CNN that housing prices would bottom out by the end of that year, but less than 30 days later he told CNN that he was convinced that we had already hit bottom, but that it would be 2010 before prices started coming back.

Back where, you might have quite reasonably wondered? Don’t stop him, I would have answered, he’s on a roll and you’ll only confuse him.

The fact is, Zandi never shuts up for even two months straight. He forecasts incorrectly almost EVERY SINGLE MONTH, and I’m only including the qualifier “almost” to play it safe even though I can’t find a single month in which he missed saying something stupid.”:

To Err For Them Is Divine

And yet, it seems that the Ratings agencies are god even if Warren Buffet is not trashing them and they admit making TRILLION DOLLAR MISTAKES.

Here’s Krugman again: “Before downgrading U.S. debt, S.& P. sent a preliminary draft of its press release to the U.S. Treasury. Officials there quickly spotted a $2 trillion error in S.& P.’s calculations. And the error was the kind of thing any budget expert should have gotten right. After discussion, S.& P. conceded that it was wrong — and downgraded America anyway, after removing some of the economic analysis from its report.”

Fortunately, Krugman is not alone, in seeing this but by and large the press narrative does NOT follow his approach and confers credibility on the ratings rats. Robert Reich has been on the case. He too tells it like it is—but is largely ignored:

“The most important aspect of policy making is getting the problem right. We are slouching toward a double-dip because we’re getting the problem wrong. Despite what Standard & Poor’s says, notwithstanding what’s occurring in Europe, and regardless of US budget projections years from now – our current crisis is jobs, wages, and growth. We do not now have a debt crisis.

Every time you hear an American politician analogize the nation’s budget to a family budget (as, sadly, even President Obama has done), you should know the politician is not telling the truth. The truth is just the opposite. Our national budget can and should counteract the shrinkage of family budgets by running larger deficits when families cannot.

Americans are more frightened, economically insecure, and angrier than at any time since the Great Depression. If our lawmakers continue to obsess about the wrong thing and fail to do what must be done – and they don’t explain it to the nation – Americans will only become more fearful, insecure, and angry.”

Paul Farrel, Marketwatch, Expect Economic Hell in the Years Ahead

Fear in Command: “The Hangdog demeanor”

NYT Quote of the Day: “Everybody gets into this hangdog demeanor with respect to economic expectations. People sit on their wallets because they feel like everything is going to get worse, and things get worse because people are sitting on their wallets.” PAUL LAUDICINA, chairman of A. T. Kearney, a consulting firm, on the nation’s economic concerns.

National Journal: The Fierce Urgency of Calm

President Obama sought to calm investor jitters and rebuild consumer confidence, assuring the nation in the midst of a steep Wall Street decline that the country will get past the current crisis, calling on Congress to work with him with a renewed “sense of urgency.”’

Did anyone get calmer? Looks like the Market kept dropping. So much for the power of th “bully pulpit!”

Many were listening but few seemed to buy his appeal for calm. The same was true in Europe as G7 pledges failed to calm the waters. The Washington Post reports: “G-7 pledge does not rally confidence”

Pledges of action by world leaders, and a radical move by the European Central Bank, did not appear able to stem another day of bitter losses in global stock markets.

MoveOn’s response: “In the midst of an awful day today in the market, the President’s announcement that he’ll provide the super committee with his own deficit-reduction recommendations is a critical opportunity for the White House to push back against the radical right-wing agenda that led to Friday’s tea party downgrade. The president needs to forcefully lay out recommendations that reflect what the American people want–making sure the rich and corporations pay their fair share while protecting Social Security, Medicare, Medicaid and other programs that working folks rely on.?

“If the president lays out a proposal that further cuts vital services, and surrenders the leverage of ending the Bush tax breaks for the wealthy in exchange for “tax reform” that asks relatively little of big corporations and millionaires–it will be clear that the White House learned nothing from the recent debt fight.

Banks Take Big Hits

Remember all the calls to break up institutions too big to fail? Was anything done? Nope. Yesterday many of the big banks took big hits. Bank Of America lost 20% of its share value. Citibank was hard hit.

NC: The plunge in big bank shares in the US has apparently focused the minds of the officialdom. Bank of America closed down 20.3%, Citigroup was off 16.4%, and JP Morgan, 9.4%. The Financial Stability Oversight Council is meeting tonight. Per the Financial Times:
Regulators convened an emergency conference call of the Financial Stability Oversight Council, which brings together the Federal Reserve, the US Treasury and other agencies. But government officials said there was no evidence of broader systemic instability or institutions’ funding coming under pressure.”

Today: The Federal Reserve Bank Meets. What will they do?

MSNBC (via Daily Bell), Alan Greenspan: We Can Always Print More Money
Tuesday, August 09, 2011 – by MSNBC

Former Federal Reserve Chairman, Alan Greenspan, appeared on MSNBC’s meet the Press where he made a shockingly blatant statement that is sure to make its way around the ‘Net at lightning speed.

What makes this ironic, is that many free-market and Austrian economists believe Greenspan’s policy of taking interest rates to historic lows at the Fed were responsible for the subprime mortgage and credit crises and the bubble in the real estate and stock markets which culminated in the 2008 market meltdown and real estate crash. In fact, Time Magazine placed him 3rd on a list of 25 people to blame for the financial crisis, and this is probably so.
While Greenspan has spent much of his time since the crisis attempting to rewrite history and his participation in the worst economic downturn since the Great Depression, mainstream media appearances such as this one will not likely do much to help his efforts.

In this MSNBC interview, Greenspan was asked, “Are US Treasury bonds still safe to invest in?” You have to listen to his answer to believe it. Greenspan sits there and utters a single sentence that basically says what no dollar-debt holder wants to hear: We will devalue your debt into the ground by cranking up the printing presses.”

Irony Watch: Even as S&P and others denounce the US government, many investors took refuge in US treasuries;

Fight Back Anyone?

(Yesterday at a Greek Restaurant, the owner quipped to me; “You Know Whats Wrong with You People?) You don’t know how to uprise!”)

HP, Progressive Groups Launch Campaign For The American Dream

Other News:

Uprising Escalates in London: WP: Looting, arson spread in London

Swaths of London became scenes of lawless looting and raging fires Monday as the wave of civil unrest that has gripped this sprawling capital sharply escalated.

Guardian: Violence Spreads To Other UK cities

A chaotic wave of violence and looting raged across London and spread to three other major British cities on Tuesday, as authorities struggled to contain the country’s worst unrest since race riots set the capital ablaze in the 1980s.

In London, groups of young people rampaged for a third straight night, setting buildings, vehicles and garbage dumps alight, looting stores and pelting police officers with bottles and fireworks. The spreading disorder was an unwelcome reminder of London’s volatility for leaders organizing the 2012 Olympic Games in less than a year….

The riots appeared to have little unifying cause — though some involved in the violence claimed to be motivated by government cuts to public spending, which will savage welfare payments.

Prime Minister David Cameron cut short his summer vacation in Italy — reversing an earlier decision to continue his break — and headed home for a meeting of the national crisis committee on Tuesday morning.”

81 Members of Congress To Visit Israel on Trip Organized by AIPAC Lobby

Do you think they will meet the mass movement that is protesting Israel’s right-wing economic policies? The Haaretz newspaper calls it a revolution.

South African President Zuma Now says he will probe arms deal after new evidence emerges that he and other politicians received millions in scandal that has been covered up for years.

NYT: Accuser of Strauss-Kahn Files Lawsuit, Her Lawyers Say

The hotel housekeeper who has accused Dominique Strauss-Kahn of sexually assaulting her sued him in State Supreme Court in the Bronx on Monday, seeking unspecified damages for an attack that she said “humiliated, degraded, violated and robbed” her of “her dignity as a woman.”

The timing of the lawsuit was unusual for cases that also involve criminal prosecutions; typically, accusers will wait until a criminal matter is resolved before proceeding with a civil action.

Nonetheless, the action seemed noteworthy for its choice of jurisdiction, the Bronx. The housekeeper, Nafissatou Diallo, lives there, and jurors in that borough may be more sympathetic to an African woman’s claims against a powerful Frenchman than jurors would be in Manhattan, where the encounter occurred. The lawsuit was also noteworthy for its smattering of new details in the case.

ZNET: New Assessment of Job Numbers show a loss, not a gain.

“So what did the jobs numbers for July show? Total net gains in employment, which is really what is important, declined by 198,000 in the July CPS report. In other words, there were 198,000 fewer non-agricultural workers employed in July than in the previous month of June!

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