S&P overreaches itself

Life under Capitalism, US politics
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Over at Crooked Timber, Dsquared put up a post laughing at the pathetic attempt of S&P to grab some publicity by downgrading America’s credit rating. Deep down in the ensuing comment thread he explains again why this is such a dumb move:

It needs to be emphasised, by the way, that the USA credit rating is an unsolicited rating. Since the USA doesn’t borrow material amounts on the international markets (other people come to the USA for the privilege of buying its debt), and since nobody in their right mind has any question of the creditworthiness of the USA, they’ve never really seen the value in paying S&P a fee to have their credit rated. S&P’s decision to issue a rating nevertheless is intended as a publicity stunt, to bolster their credibility by demonstrating their analytical prowess to the world.

Of course it only works if people care more about S&P’s opinion than their lying eyes (ie, if S&P moves the market, or if people regard S&P as having better information or analysis than the market in general). For that reason, the massive MBS/CDO failure, and the massive Ireland and Iceland failures, and the scandal of the muni/corporate rating inconsistency, do actually make a difference in assessing the credibility of the USA outlook change. This would have been a very questionable move even if it had some effect and the T-Bond yield had risen – given what actually happened it’s a painful embarrassment.

Doin’ the math

Life under Capitalism, US politics
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Or, yes Virginia, America can solve its budget problems soaking the rich [*]:

Medicare doesn’t require “tens of trillions,” unless your budget horizon is something like twenty years. This year, Medicare will cost $572 billion. In 2020, according to the CBO, it will cost $949 billion. Over the next ten years, it will cost $7.6 trillion, which isn’t even a ten of trillion, much less “tens of trillions.” (And that doesn’t include “offsetting receipts”—$80 billion this year, and $1.2 trillion over the next ten, which reduce those outlays significantly. Supporting spreadsheet is here.) Right now, the top 1% of the U.S. pop has something like $1.4 trillion in income. The next 4%, $1.3 trillion. The next 5% has almost a trillion. (Computed from Piketty and Saez data here.) In other words, you could entirely fund Medicare by hitting up the top 1% for about a third of its income. Yeah, I know that’s politically impossible, but they’ve got the money—we just can’t have any of it.

[*] Up to a point.

Criminal bankers hardly prosecuted in the US — quelle surprise

Crisis? What Crisis?, Life under Capitalism
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The New York Times has a big article up on the lack of prosecutions coming out of the financial crisis

“This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity,” said William K. Black, a professor of law at University of Missouri, Kansas City, and the federal government’s director of litigation during the savings and loan crisis. “But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.”

Largely because an evil conspiracy wasn’t needed, when everybody in government and the regulatory agencies was already convinced prosecuting financial fraud was a Bad Idea because it would frighten the Market, that oh so convenient impersonal historical force which cannot be reasoned with, only appeased. Doesn’t help that much of Obama’s financial people are poachers turned gameskeepers. The whole strategy for dealing with the economic crisis seems to have been to pump money into the very banks who caused it, bail out Wall Street and dump the costs on Main Street, then use the crisis to e.g. bump off social security because it’s now unaffordable.

The real surprise in this is how little real public anger there has been; no bankers have been dangling from trees or gotten their overpriced houses torched — only Fred the Shred’s windows were thrown in.

As long as we can’t see it, who cares what happens

bigotry, Europe
Published on 1 Comment on As long as we can’t see it, who cares what happens

Angry Young Alex explains what the the French burka ban and European responses to the political revolutions in the Middle East have in common:

There’s another clue if we look at why we’re not banning it here: it would run “contrary to British instincts”. Our tabloids can’t look at sickening fear, desperation and poverty abroad without worrying about our ethnic purity being soiled. Our government declines mandatory face-nudity, because it’s not quite compatible with our petty, sense of arbitrary national identity. The French are so outraged by women’s oppression that they demand not to have to look at it any more. We see the injustices suffered by Arabs and Muslims the world over, and the first thing we think is “how can we stop it affecting us?”.