United States loses AAA credit rating from S&P • Hacker News Board

Re: United States loses AAA credit rating from S&P

#371

Post by cookiecaper » Sat, Aug 06, 2011, 1:45 PM UTC

encoderer wrote: post #366

winestock wrote: post #206

Earlier quoted context omitted.

First, both parties have raided Social Security, not just Republicans. In fact, both parties have been complicit in the government's financial misfeasance for a long time. Second, you mention the money "to pay back the workers who contributed." There was never any money to pay back. Social Security was always a pay-as-you-go system. Current revenue pays for current appropriations. There was never any "trust fund," an…

First, you're right, both parties have diverted Social Security surpluses. But only one party -- the GOP -- is trying to avoid paying it back, using the SS deficit as a tool to dismantle or alter the program. Second, that doesn't change the social contract we have with people who have spent their entire lives paying out up to $6000 a year in wages to the fund. Third, yes, while baby boomers retire, it will run a defi…

>Second, that doesn't change the social contract we have with people who have spent their entire lives paying out up to $6000 a year in wages to the fund.

A good reason not to trust the government to keep a forced retirement account on your behalf. Someone is going to get the short end of the stick here eventually.

I would prefer that people own up to this and we set up an orderly, phased dismantling of the program, but that doesn't seem very likely. Politicians and head-in-the-sand populace apparently insist on a single disastrous collapse that leaves millions insolvent rather than admitting and accepting that there will be some controlled loss involved in a phaseout.

Re: United States loses AAA credit rating from S&P

#372

Post by Duff » Sat, Aug 06, 2011, 1:48 PM UTC

hadronzoo wrote: post #300

trevelyan wrote: post #223

Earlier quoted context omitted.

1. Social security reform was a core part of the Democratic platform in 2000. "I will keep Social Security in a lockbox, and that pays down the national debt and the interest savings I would put right back into Social Security." (Al Gore, Oct 4, 2000). Put simply, the Democratic policy aim was to divert the surplus into paying off the debt while preventing lower interest rates from spiking government borrowing/spendi…

I think it will take more than rolling back the Bush tax cuts. If no entitlements changes are made, it would take roughly twice the GDP of the entire world: "Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percen…

Social Security has very well defined costs that are manageable if you implement some reforms.

Medicare is a another story altogether. Fact is, a 1960-style PPO for every old person just isn't sustainable when health costs rise like 13% per year.

Re: United States loses AAA credit rating from S&P

#373

Post by cookiecaper » Sat, Aug 06, 2011, 1:55 PM UTC

dreamdu5t wrote: post #276

gnosis wrote: post #178

Earlier quoted context omitted.

You forgot the War on Drugs. Get rid of it, free all the people in prison for non-violent drug-related offenses, and tax the newly legalized drugs. This should free up a lot of money that's being wasted on ruining people's lives right now, and make more money from taxing legal drugs. As a bonus, it'll get rid of a lot of organized crime. Witness what happened with the repeal of Prohibition.

The war on drugs is only 0.5% (approx. $18 billion) of the Federal budget (approx. $3,456 billion), so it's inconsequential to our debt crisis. I whole heartedly agree that drug prohibition should be repealed, and that we need to put an end to the war on (some) drugs. But, the military, social security, and medicare comprise approx. 70% of the budget, so it's really not going to help us solve the debt.

Prisons are primarily a state-level expense. You don't get sent to federal prison for possession.

Re: United States loses AAA credit rating from S&P

#374

Post by cookiecaper » Sat, Aug 06, 2011, 1:57 PM UTC

pyre wrote: post #326

rwmj wrote: post #296

Earlier quoted context omitted.

Why do they get ousted? Surely you'd vote for them?

Not enough people would though. They would flock to the other candidate that would inevitably reassure them that everything was going to be ok. Heaven forbid that people should vote by thinking about the issues rather than just digestion a handful of sound-bites.

This is really a symptom of control and hypnosis by media sources and a lack of capacity to reason independently than a direct "If you don't flatter me I'll kill you!" response. Though obviously, flattery has a long and successful history.

Re: United States loses AAA credit rating from S&P

#375

Post by bokonist » Sat, Aug 06, 2011, 2:00 PM UTC

T-hawk wrote: post #258

bokonist wrote: post #174

Mindboggling. Does the S&P understand that the U.S. debt is all denominated in a currency that the U.S. government can print at will? If the U.S. government doesn't have an AAA rating, what does an AAA rating even mean? At the moment, the national "debt" is over $10 trillion dollars, while the total supply of currency is about $2 trillion, and total government profits are about negative $1.5 trillion. If we assume th…

http://en.wikipedia.org/wiki/Fractional-reserve_banking Fractional-reserve banking might be a good topic to review. It is entirely possible for more debt than currency to exist. Suppose you deposit $100 at a bank, which lends $80 of it to Alice. She deposits her $80 in another bank which lends $60 to Bob. So that's a perfectly legit scenario where more debt ($140) exists than currency ($100). And it doesn't mean that…

History shows that fractional reserve banking is incredibly unstable with that degree of leverage. As soon as there is the slightest hint of fear of bankruptcy, everyone hoards cash, no one can repay loans, and thousands of banks go bankrupt. See for reference every single recession and depression before the creation of the FDIC.

The only reason fractional reserve works now is because there is an FDIC and Federal Reserve who will create new money any time there is excessive demand for people to convert deposits into cash. Fractional reserve only works because of the fiat powers of the government. So my point stands - if you assume the U.S. is using its fiat powers, then the debt is AAA. If you assume the U.S. is not using its fiat powers, then the U.S. should have the debt rating of an over-leveraged, 1929 private bank - ie, extremely low.

Did you just call the entirety of Standard & Poor's, a leading financial firm for over 150 years, extraordinarily ignorant?

Yes I did. And why shouldn't I? Maybe the S&P was glorious a hundred years ago. But the last few years their track record has been dismal. See for reference the entire subprime fiasco.

What basis can you demonstrate that you understand the world and national economies and credit markets better than a few thousand really smart economists?

All I have his my own brain, and my use of reason, logic and evidence. You either buy my arguments or you don't. If you're not willing to use your own reason, and base your views entirely on appeals to authority, then there really is not any point in further discussion.

If you wish to see my arguments laid out in further detail, I do have a blog. Here are some general thoughts on the economy: http://intellectual-detox.com/assorted-thoughts-on-the-econo... It's only been nine months since I posted that article, but so far my predictions have been spot on.

Here is a post I wrote about the national debt: http://intellectual-detox.com/why-the-national-debt-is-non-p...

Re: United States loses AAA credit rating from S&P

#376

Post by bokonist » Sat, Aug 06, 2011, 2:03 PM UTC

danenania wrote: post #219

bokonist wrote: post #174

Mindboggling. Does the S&P understand that the U.S. debt is all denominated in a currency that the U.S. government can print at will? If the U.S. government doesn't have an AAA rating, what does an AAA rating even mean? At the moment, the national "debt" is over $10 trillion dollars, while the total supply of currency is about $2 trillion, and total government profits are about negative $1.5 trillion. If we assume th…

Paying back creditors in severely devalued dollars isn't exactly meeting obligations. Presumably the ratings would take this into account. That said, I agree these ratings don't have much basis in reality. As others have commented, look at how S&P and similar organizations rated subprime debt. They're part of the Wall Street club. They might nibble a bit on the hand that feeds them for political reasons, but they cer…

Issuing currency to back the "debt" is not a devaluation. Imagine you hold $100k in treasury bonds. The Federal reserve then prints a bunch of money, buys those bonds from you, and gives you cash. Are you then going to be willing to pay twice as much for a car, twice as much for a loaf of bread, etc? No. Your financial position has not changed. No change in your financial page, no inflation, no devaluation. All buying back debt with currency does is replace one piece of paper backed by the US Gov with another piece of paper backed by the government.

See my post here for a more in depth explanation: http://intellectual-detox.com/why-the-national-debt-is-non-p...

Re: United States loses AAA credit rating from S&P

#377

Post by bokonist » Sat, Aug 06, 2011, 2:05 PM UTC

yaroslavvb wrote: post #257

bokonist wrote: post #174

Mindboggling. Does the S&P understand that the U.S. debt is all denominated in a currency that the U.S. government can print at will? If the U.S. government doesn't have an AAA rating, what does an AAA rating even mean? At the moment, the national "debt" is over $10 trillion dollars, while the total supply of currency is about $2 trillion, and total government profits are about negative $1.5 trillion. If we assume th…

Just because the government has the printing press doesn't mean it won't default. When China downgraded US ratings last week they said it's because "neither the Democratic Party nor Republican Party has shown any consideration for the general interest in order to argue for their own partisan interest; they had a hard time making the correct choice in a timely manner"

Right, the only risk of default is political risk. But the S&P's rating is still absurd. The peak of political risk was one week ago. Now the risk of a politically-caused default is much lower than it was one week or one month ago. So they should have cut the rating a few months ago, and raised it after the debt ceiling deal was passed.

Re: United States loses AAA credit rating from S&P

#378

Post by cookiecaper » Sat, Aug 06, 2011, 2:13 PM UTC

hermannj314 wrote: post #369

epscylonb wrote: post #351

Earlier quoted context omitted.

The problem is the voters, you get the politicians you deserve. I don't think the american people are dumb or lazy, I think they are very complacent. Americans have become so used to their fairly high standard of living that they are ignoring substantive issues and focusing on trivia. My personal prediction is that the voters will wise up and listen to smart people who understand the issues eventually. At the moment…

The problem isn't the voters, the problem is the process. There is no way that basing a representative democracy on geographical cohorts can be optimal. I assume it is based originally on logistical constraints, but today is something we just accept because it is how it has always been done. Wouldn't it make more sense to divide the political arena based on the scope of the issues allowed to be legislated and not on…

As above, the problem is corruption. We have a structure that is supposed to effectively keep the federal government almost completely incapable of doing anything besides maintaining international borders, treaties, and other boring matters like import taxes. Because the people in power like power, and because the populace is complacent enough to allow it, they ignore any structural inconveniences like the fact that a strict reading of the Constitution forbids almost all federal programs and activities that exist today.

Re: United States loses AAA credit rating from S&P

#379

Post by cookiecaper » Sat, Aug 06, 2011, 2:23 PM UTC

clarkevans wrote: post #338

latch wrote: post #135

Earlier quoted context omitted.

Social security shouldn't be cut, it should be turned into a purely social program (and grandfathered in at that too). Instead of being an entitlement program, it should become like welfare and enabled for the bottom X % of the population. Specifically, the burden for retirement for the middle class should be placed on individuals rather than government. For too long, babyboomers have relied on social security as a s…

You completely underestimate how the average person finds something more important to spend money on now rather than saving for their future. The reason we have social security is because people don't save what they need to. If you don't have this, most of the population will be in poverty when they retire. Social security also has things like survivor's benefits: payments to children and dependents who have lost a w…

What you've described is a symptom that can't just be fixed by closing your eyes and throwing money at the government while saying, "Give this back when I need it, OK?"

If the populace doesn't have the discipline to control and organize their extra resources, how can we expect politicians to do so? And why do we even trust them to do it? It's sad that people with the attitude you've described were able to convince the government to enact this as a mandatory thing -- but, the government likes money. We've seen what a faithful steward they have been for us.

People without the self-restraint to save money for a period of time where they expect to live without performing any money-generating work have problems that can't be fixed so simply. Maybe that's the cause of all of this turmoil in the first place.

The idea of "retirement" is also a curious new invention; people didn't save for retirement before the industrial revolution because back then, people would own houses and lands, accumulate real wealth that could be used to sustain life (e.g., agricultural assets) when individuals got too old to perform the work themselves, etc.

The pace of change since the 1860s has been extremely staggering and has introduced many concerns that hadn't existed previously. It is an intriguing matter to be sure. Hopefully we can come out of it all right.

Re: United States loses AAA credit rating from S&P

#380

Post by jimbokun » Sat, Aug 06, 2011, 2:23 PM UTC

Duff wrote: post #370

winestock wrote: post #134

Earlier quoted context omitted.

When Fukuyama was talking about the Evangelical Christians, I think that he meant their doctrine of "The Rapture" and how it motivates their support for Israel. It's scary just how much of their politics rotate around that. Seriously, Christopher Hitchens (yes, that Christopher Hitchens, the atheist) can get published in National Review because of his support for Israel and for wars to bring democracy to the Middle E…

The string-pullers behind the conservative "movement" see the Evangelical Christians for what they are -- a bunch of easily fooled suckers. (Especially the non-denominational types) They are insecure, fearful people who respond to the crazy message that's being sold. One of the big motivations behind the pushing of non-denominational, stupid christianity as you get these large flocks of people attracted to the person…

The problem is, the inmates took over the asylum. It seems that the string pullers have been pushed aside and the suckers are now in charge.