RATINGS AGENCIES STILL CLUELESS, THREATEN TO DOWNGRADE UNCLE SAM Author: L. Randall Wray · November 8th, 2012 · 856 http%3A%2F%2Fwww.economonitor.com%2Flrwray%2F2012%2F11%2F08%2Fratings-agencies-still-clueless-threaten-to-downgrade-uncle-sam%2F RATINGS+AGENCIES+STILL+CLUELESS%2C+THREATEN+TO+DOWNGRADE+UNCLE+SAM 2012-11-08+15%3A56%3A38 L.+Randall+Wray http%3A%2F%2Fwww.economonitor.com%2Flrwray%2F%3Fp%3D856 › Share This Print They’re at it again. Moody’s is threatening to downgrade the US Federal government if it does not adopt fiscal austerity. http://www.reuters.com/article/2012/11/07/us-usa-moodys-rating-idUSBRE8A61ZZ20121107 Moody’s as well as other credit ratings agencies already have the US on a negative watch. Yes, the same raters who happily gave Triple A ratings to the trashiest mortgages the world had ever seen warn about rising default risk of sovereign currency issuing government. That’s clueless. It is very hard to know how much of this is just political posturing–an attempt to push Congress and the President to use austerity as a way to push through the Neoconservative agenda. Since the ratings agencies played a huge role in creating the real estate bubble and bust–that helped to move all wealth to the top 1%–we probably should assume that a lot of this is pure politics. Sovereign government cannot be forced to default on its own floating currency debt. The only risk is a voluntary default. Moody’s is all in a huff about a Federal government debt to US GDP ratio of about 100%. Japan’s is double that. And what do markets think about the default risk? Nada. I know that some people claim that while the US or Japan cannot be forced to default, their politicians might choose voluntary default. I don’t believe it, nor do markets. When the raters downgrade Japan or the US, the market just goes Ho-Hum and ignores it. Interest rates don’t move. And if Moody’s does downgrade the US this time, markets will ignore it again. They know that even the craziest Bozos we’ve got in Washington are not going to let Uncle Sam miss debt payments. With the election over, Washington has turned to the “looming fiscal crisis” that supposedly faces the Federal government. Suddenly the same politicians who wrote the legislation that created the “fiscal cliff” by writing into law automatic spending cuts are huffing and puffing about how it’d be a catastrophe to let their law determine the cuts. I’ll say more about all this posturing later. But here’s the bigger takeaway. Yes, the budget deficit is large, due to the automatic stabilizers. It won’t shrink, and shouldn’t shrink, until we have a robust recovery. I think that is months and probably years away. Meanwhile, the deficit is helping to prevent this downturn from becoming a full blown Great Depression. The trillion dollars or so of deficits means by identity that the nongovernment sector is running a surplus of a trillion dollars. While a small portion of that leaks out of the US (due to our current account deficit), most of it stays home, where it helps firms and households to rebuild their balance sheets. Anyone who argues for cutting Federal deficits now must be arguing for cutting the nongovernment’s surplus. Dollar for dollar. Anyone who wants to reduce the Federal debt outstanding must be arguing for cutting the private sector’s net wealth. Dollar for dollar. And here’s another point. Budget deficits create profits for firms. Dollar for dollar. If you are against deficits, you must be anti-business! You are a profit destroyer. This might not be intuitive but it results from a macroeconomic identity called the Kalecki Profits Equation. Here’s a graphic that shows the derivation: If that, too, is opaque, there is a very nice explanation here: https://www.fidelity.com/viewpoints/market-and-economic-insights/corporate-profits . Here are the key paragraphs: In the post-war era, government deficits have played a more supportive role in terms of offsetting the retrenchment in private investment during economic downturns. When private investment was buffeted by the financial crisis in 2008 and corporate profits plummeted, the massive increase in government deficit spending allowed a quick recovery in profits during 2009. According to the Congressional Budget Office (CBO), fiscal austerity measures related to the fiscal cliff would result in a more than $500 billion reduction in the government budget deficit in 2013. Given the negative influence of government savings (reduced deficits) on profits, this would mathematically decrease the source of corporate profits by a substantial amount. According to the profit equation, if the full fiscal cliff were to occur, the significant contraction in the government deficit from 2012 to 2013 would cause a 31% decline in 2013 corporate profits (see chart below). And here is the key chart: (If the charts are too small, click on them and they should get big enough to read them.)
标签: 财政经管大学堂：名校名师名课
京公网安备 11010802022788号
论坛法律顾问：王进律师
知识产权保护声明
免责及隐私声明
