Cabbage Stew

Into Each Economy a Little Market Must Fall
©2011 Ross Williams

Two weeks ago Standard & Poors famously – or not, depending on which pocket you put your Keynes in – lowered the bond rating on US treasuries from AAA to AA+, signaling to the world’s markets what the world’s markets had known for quite a while: that the world’s largest economy was operating in an unsustainable manner. The Obama administration, fresh from the bipartisan deal that gave the US $2.8trillion more in Monopoly Money to unsustainably spend, cried “No fair!” as they sucked their thumbs about it. Markets around the world tanked. Then splurged. Then tanked. Then splurged.

But mostly they tanked. Well-diversified 401ks dropped 10% by the time it was done.

Last week, another Wall Street rating agency – Fitch – declared that the US bond rating should still be AAA, and that they would leave their own rating alone. The Obama administration, citing Fitch, immediately declared that the S&P move was politically motivated. The markets were unconvinced and wallowed in malaise, suggesting that Fitch was attempting to curry favor with the US Government.

This week, Obama’s Justice Department announced that S&P is going to be audited. A surprise it is not to anyone who has watched how Washington works with Wall Street. The US Treasury Department and the Securities and Exchange Commission is run by individuals who grew up on Wall Street robbing widows and orphans of their life savings and penny-pensions.

Both parties do this, and Goldman-Sachs is the government’s favorite source for obtaining widow and orphan thieves. Among the primary benefits of this coziness is that when the government’s fiscal policies notoriously fail, as they did in ’08 from the decade-long mandate demanding mortgage lenders ignore bad credit, the government has a built-in fall guy: blame the fat-cats on Wall Street for actually doing what the government allows or, in the case of the Housing Bubble, what the government requires. Robbing widows and orphans is government policy, but when the widows and orphans catch on, it’s all Wall Street’s fault for doing it.

Cabbage, n., A familiar kitchen-garden vegetable about as large and wise as a man’s head.

The cabbage is so called from Cabagius, a prince who on ascending the throne issued a decree appointing a High Council of Empire consisting of the members of his predecessor's Ministry and the cabbages in the royal garden. When any of his Majesty's measures of state policy miscarried conspicuously it was gravely announced that several members of the High Council had been beheaded, and his murmuring subjects were appeased. (1)

When Wall Street runs out of widows and orphans to fleece, the incoming administration levies fines on Wall Street firms, then selects the best widow and orphan fleecer to become the new Secretary of the Treasury, and the cycle continues unbroken.

While all this gaiety was going on, European economies started announcing that they have no economy to speak of, either. Or, well, rather, those European economies that were not already in well-known trouble started announcing that they had no economy to speak of, and that of course caused more Wall Street outfits to re-examine the health of the US economy ... which is $14.3trillion in debt with $2.8trillion of play money burning a hole in the Government Pocket [the ones it puts its Keynes in].

And no one, naturally, can guess what these Wall Street outfits found. Announced just this morning, and sure to be denounced by the Obama Administration by this afternoon as another “political” motivation, and as surprising as a black President in racist America, is a Morgan Stanley report that the United States is “dangerously close” to yet another recession. The first one was just so much fun.

This news is exactly what the financial world knows quite well but doesn’t talk about, and someone actually uttering the words, on top of Europe’s markets already reacting to European financial idiocy, has created a 5% drop in the markets by mid-morning. The US economy is the $17.1trillion elephant in the room.

Fitch, which believes debt of $17.1trillion is a safe AAA bet, meanwhile, just lowered the New Jersey bond rating from AA to AA- for running a $94billion debt. No, there’s no political motivation there at all. New Jersey is governored by a Republican highly and vocally critical of Obama, and there’s no doubt a group of Fitch executives looking to position themselves to jump into the slot currently held by bubblehead Tim Geithner, who’s on the hotseat for overseeing the Obama Administration’s thoroughly inept handling of what’s laughingly referred to as the US economy.

So, Wall Street executives are saying nothing that anyone [including the government] doesn’t already know, the government is publically shocked and offended by it, nitwit Americans who refuse to believe that their favorite politician of their favorite party would ever lie and manipulate loyal supporters are worked into a froth laying blame on Wall Street, the government appeases the foaming masses with formulistic investigation, and in the end those Wall Street executives who dared to say what everyone already knew will get promoted into the very government that used them as the scapegoat for their own hideously incompetent economic policies.

And a new crop of cabbage is sown.


1] Ambrose Bierce, The Devil’s Dictionary