Monday, August 8, 2011

Some commentary on the U.S. credit rating downgrade

In case you missed all the excitement on Friday, Standard & Poor's downgraded the United States' credit rating from AAA to AA+.

To put this in perspective, this is the first time our credit rating has been downgraded in over a century. The 1929 Stock Market Crash, the Great Depression, World War I and II, the Jimmy Carter years, September 11th...none of these events were damaging enough to downgrade our credit rating, but two and a half years under President Obama was.

Our AAA credit rating survived President Jimmy Carter.Sat Aug 06 00:55:05 via UberSocial for BlackBerry

After the jump, a selection of some commentary from around the conservative blogosphere:

Here's an excellent column by Andrew Malcolm, who writes the "Top of the Ticket" blog for the L.A. Times, regarding Treasury Secretary Tim Geithner's decision to remain with the Obama administration:
Top of the Ticket | Geithner agrees to stay at Treasury, continue Obama's amazing economic policies
The master of finance who has so successfully assisted President Obama in boosting the national debt by more than $3 trillion, driving unemployment back north of 9% by spending only $787 billion in stimulus funds, corroding consumer confidence and presiding over the first federal credit downgrading in history has agreed to stick around to continue his impressive work for this Democratic administration.

...Obama is reported pleased...So are Republicans. Rumors that Geithner planned to leave government after helping to prolong the debt debate had worried the GOP that Obama might pick a competent replacement who could have a positive economic effect before next summer when voters' impressions start hardening for the fall election.

...Geithner added, "We still have a lot of work to do." Which could be a promise or threat...

My 2 year old niece is learning to count. She says "1, 2, 5, 6, 7, 10!" At least she's better at math than Timmy Geithner!Mon Aug 08 03:26:53 via UberSocial for BlackBerry

As expected, the Left's spin machine is in overdrive trying to pin the blame for the downgrade on the Republicans. Here's an excellent, must-read post by Tom McCammon debunking an already widespread myth about the S&P Report:
TheRightSphere | Tom McCammon | S&P Downgrade - Spin vs. Reality

Saw the Ape Movie. NOT realistic....the Apes are too smart to take us over with bad credit and this much debt. #sayfie #debtSat Aug 06 18:57:40 via HootSuite

The latest clever video from Ben Howe:

YouTube | benhoweblog | Happy Birthday President Obama

Doug Powers, posting at, discusses how Democrats like John Kerry and David Axelrod made the rounds on the Sunday talk shows making fools of themselves trying to blame the tea party for the credit rating downgrade:
Michelle Malkin | Doug Powers | John Kerry and the 'Tea Party Downgrade'
For the first two years of Obama’s presidency, the Democrats...had full control of the Senate and House. At that point the Democrats could have done anything, including cutting back spending to sane levels (pause for laughter), but instead they went on a wild spending binge and presided over the largest expansion of government since World War II.
As a result, Republicans from something known as the “Tea Party,” who believe that government spending should be held in check and don’t subscribe to a hackneyed “the more you spend the more you save” government spending philosophy, were elected...Recently a deal was struck that raised the debt ceiling $2.4 trillion more, which included some spending cuts. The cuts will take place mostly “down the road” but naturally the extra money will be available to spend immediately. These Tea Partiers didn’t want to raise the debt ceiling, but rather demanded immediacy in tackling the problem of unsustainable spending. Last Tuesday the US saw the largest one-day debt bump in history. On Friday S&P downgraded US credit for the first time in history, saying it was because the government wasn’t addressing unsustainable spending aggressively enough — and it’s the Tea Party’s fault?


  1. Blaming Obama for the United State's credit downgrade, because he was in office, is like blaming the waterboy for a Super Bowl loss.

  2. If you're going to plagiarize my ideas from twitter ( at least try to make it grammatically correct.

    And no, my waterboy analogy doesn't work here. Unlike the planning of the OBL raid, Obama and people he personally appointed (like Secretary Geithner) *were* involved in major decisions regarding the debt ceiling and our economy.

  3. We defaulted in 1934 with the famous "Liberty Bonds."

    The financing of the United States government stepped up to a whole new level upon its entry into the Great War, now known as "World War I." The new enterprises of the government included merchant-fleet maintenance and operation, production of ammunition, feeding and equipping soldiers entirely at its own expense, and many other expensive things it had never done before or done only on a much smaller scale.

    To finance these activities, Congress issued a series of debentures known as "Liberty Bonds" starting in 1917. The preliminary series were convertible into issues of later series at progressively more favorable terms until the debt was rolled into the fourth Liberty Bond, dated October 24, 1918, which was a $7 billion dollar, 20-year, 4.25 percent issue, payable in gold at a rate of $20.67 per troy ounce.

    By the time Franklin Roosevelt entered office in 1933, the interest payments alone were draining the treasury of gold; and because the treasury had only $4.2 billion in gold it was obvious there would be no way to pay the principal when it became due in 1938, not to mention meet expenses and other debt obligations. These other debt obligations were substantial. Ever since the 1890s the Treasury had been gold short and had financed this deficit by making new bond issues to attract gold for paying the interest of previous issues. The result was that by 1933 the total debt was $22 billion and the amount of gold needed to pay even the interest on it was soon going to be insufficient.

    In this exigency Roosevelt decided to default on the whole of the domestically-held debt by refusing to redeem in gold to Americans and devaluing the dollar by 40 percent against foreign exchange. By taking these steps the Treasury was able to make a partial payment and maintain foreign exchange with the critical trade partners of the United States.

    If we price gold at the present-day value of $1,550 per troy ounce, the total loss to investors by the devaluation was approximately $640 billion in 2011 dollars. The overall result of the default was to intensify the depression and trade reductions of the 1930s and to contribute to fomenting World War II.


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