(PV) Subprime Nation - Warning from Moody's

[Etta Place]

Scary.

January 15, 2008
Subprime Nation
By Patrick Buchanan

Since it began to give credit ratings to nations in 1917, Moody's has rated the United Statesw triple-A. U.S. Treasury bonds have been seen as the most secure investment on earth. When crises erupt, nervous money seeks out the world's great safe harbor, the United States. That reputation is now in peril.

Last week, Moody's warned that if the United States fails to rein in the soaring cost of Social Security, Medicare and Medicaid, the nation's credit rating will be down-graded within a decade.

Our political parties seem oblivious. Republicans, save Ron Paul, are all promising to expand the U.S. military and maintain all of our worldwide commitments to defend and subsidize scores of nations.

Democrats, with entitlement costs drowning the federal budget in red ink, are proposing a new entitlement -- universal health coverage for the near 50 million who do not have it -- another magnet for illegal aliens. Moody's is telling America it needs a time of austerity, while the U.S. government is behaving like the governments we used to bail out.

California has already hit the wall. With an economy as large as a G-8 nation, the Golden State is looking at a $14 billion deficit in 2009 and a $3 billion shortfall in 2008. Gov. Schwarzenegger has called for slashing prison staff by 6,000, including 2,000 guards, early release of 22,000 inmates, closing four dozen state parks and a 10 percent across-the-board cut in all state agencies. The Democratic legislature is demanding tax hikes, which would drive more taxpayers back over the mountains whence their fathers came.

Meanwhile, Washington drifts mindlessly toward the maelstrom. With the dollar sinking, oil surging to $100 a barrel, the Dow having its worst January in memory, foreclosures mounting, credit card debt going rotten, and consumers and businesses unable or unwilling to borrow, we appear headed into recession.

If so, tax revenue will fall and spending on unemployment will surge. The price of the stimulus packages both parties are preparing will further add to the deficit and further imperil the U.S. credit rating. This all comes in the year that the first of the baby boomers, born in 1946, reach early retirement and eligibility for Social Security.

To stave off recession, the Fed appears anxious to slash interest rates another half-point, if not more. That will further weaken the dollar and raise the costs of the imports to which we have become addicted. While all this is bad news for the Republicans, it is worse news for the republic. As we save nothing, we must borrow both to pay for the imported oil and foreign manufactures upon which we have become dependent.

We are thus in the position of having to borrow from Europe to defend Europe, of having to borrow from China and Japan to defend Chinese and Japanese access to Gulf oil, and of having to borrow from Arab emirs, sultans and monarchs to make Iraq safe for democracy.

We borrow from the nations we defend so that we may continue to defend them. To question this is an unpardonable heresy called "isolationism."

And the chickens of globalism are coming home to roost.

We let Europe to get away with imposing value-added taxes averaging 15 percent on our exports to them, while they rebate that value-added tax on their exports to us. Thus, the euro has almost doubled in value against the dollar in the Bush years, as NATO Europe begins to bail out on Iraq and Afghanistan.

We sat still as Japan protected her markets and dumped high quality goods into ours and China undervalued its currency to suck jobs, technology and factories out of the United States. Now, China and Japan have $2 trillion in cash reserves. The Arabs have an equal amount of petrodollars. Both are headed here to spend their depreciating dollars snapping up U.S. assets -- banks, ports, highways, defense contractors.

America, to pay her bills, has begun to sell herself to the world.

Its balance sheet gutted by the subprime mortgage crisis, Citicorp got a $7.5 billion injection from Abu Dhabi and is now fishing for $1 billion from Kuwait and $9 billion from China. Beijing has put $5 billion into Morgan Stanley and bought heavily into Barclays Bank.

Merrill-Lynch, ravaged by subprime mortgage losses, sold part of itself to Singapore for $7.5 billion and is seeking another $3 billion to $4 billion from the Arabs. Swiss-based UBS, taking a near $15 billion write-down in subprime mortgages, has gotten an infusion of $10 billion from Singapore.

Bain Capital is partnering with China's Huawei Technologies in a buyout of 3Com, the U.S. company that provides the technology that protects Pentagon computers from Chinese hackers.

This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches.

Page Printed from: http://www.realclearpolitics.com/art...me_nation.html at January 15, 2008 - 02:31:04 PM CST

[Frenchy]

The warning sirens are sounding loudly, but our deft leadership doesn't here them.

[FloridaPhil]

In answer to those who say that Ron Paul doesn't have a chance, in my view, he is our ONLY chance. The 'established' politicians can see no further than greed, personal gain and power and will continue to pay the band to play while the ship sinks...it's just about game over and we, the people, will have lost. The politicians have their escape routes well mapped out - do you? Painful days ahead.

[eric_t12]

this sounds awfully familiar to that one guy... uhhh...

what was he...

oh yea the comptroller general of the united states...

and te whole "fall of rome" thing...

[trik396]

Very good article, Etta...

I like to stay positive about things in general... but I really think we're doomed.

[east_stingray]

There's some sensationalism smattered in there, but for the most part I think the article is correct. Jim Puplava is now predicting a Depression in 2010, not just recession. I believe him.

[Bill in San Jose]

I think we're still in the same recession we were in during the 81 time frame, the Regan defense spending was the #1 cash-infusion into the economy, the dot-com bubble was the #2, and the home refinancing/ take equity out to spend was the #3. Only now we've lost 1/3 of our manufacturing jobs in the past 8 years, and the rest that Buchanon says.

I'm afraid the fit may be hitting the shan in 08.

Look around where you live- are any companies agressively hiring with good paying jobs?

[Etta Place]

Originally Posted by Bill in San Jose

I think we're still in the same recession we were in during the 81 time frame, the Regan defense spending was the #1 cash-infusion into the economy, the dot-com bubble was the #2, and the home refinancing/ take equity out to spend was the #3. Only now we've lost 1/3 of our manufacturing jobs in the past 8 years, and the rest that Buchanon says.

I'm afraid the fit may be hitting the shan in 08.

Look around where you live- are any companies agressively hiring with good paying jobs?

I think this make a lot of sense. The economy actually is being kept afloat by what some call “military Keynesianism.” Not only are we arming ourselves, we’re selling arms to other nations too. Did you read that we have pledged some new weapons to the Saudis? http://www.reuters.com/article/polit...40435920080114

The dot.com boom buoyed the 90s, but since then there is no technology or method of wealth creation to prosper Americans. It’s like we’re engaged in this massive Ponzi scheme where we buy things to keep people working so people can afford to buy things. Unemployment may be low, but how many of these people are working at jobs comparable income-wise to the manufacturing jobs we have lost?

A couple of ideas that I think about:

I don’t know much about economics, but what would happen if the U.S. became an investing nation rather than a consuming one?

Is “green” technology the thing that is going to give the U.S. a competitive edge? Are we already behind other nations like Japan and Germany? Is “green” technology the next big thing that will create value in our economy?

[eric_t12]

The plan angered Israel's backers in Washington but Israeli security sources said on Sunday the United States would provide the Jewish state better "smart bombs" than those it plans to sell Saudi Arabia under the regional defense plan.

OMG!

taxdollars at work. arming both sides.

and they say RP hates the jews.... the great decider is planning on giving selling them to the kingdom (note its not a democracy... hmmmmm....) of saud, not allies with israel, but will gladly sell israel better bombs to make up for it.

what a crock...

[Archer1945]

I don’t know much about economics, but what would happen if the U.S. became an investing nation rather than a consuming one?

For an example of an investing nation take a look at Switzerland. Actually I think we were up until just after WW II.