So let me get this straight: I'm likely to see many thousands of dollars in my retirement portfolio wiped out today because an arguably incompetent ratings agency called Standard & Poor's decided to downgrade the U.S. debt?
That action raises questions about the U.S. government's ability to pay back loans. In turn, it could raise the rate at which this country can borrow money and could increase our ever-burgeoning national debt. Never before in U.S. history has this country had its debt rating downgraded.
The only problem is that the people doing the downgrading are clowns. Did you see the Academy-Award-winning documentary Inside Job?
It traces the root causes of the big collapse of 2008, the one that caused housing prices to crumble, carved the market in half, and cost millions of Americans their jobs. Among the leading culprits were rating agencies, like Standard & Poor's, which were staffed by a bunch of Wall Street wannabes not quite good enough to get the seven-figure bonuses there. So, in the hope of buffing up their resumes to get those big bucks, Inside Job
shows, these "regulators" routinely turned a blind eye to the shenanigans on Wall Street to give AAA ratings to stuff that wasn't much better than junk bonds. The movie is a must see in today's climate. Dust off your Netflix account.
Don't believe me or Inside Job? Read today's column
by Nobel Prize winner Paul Krugman, who says of S&P that its economists "aren't the sharpest tools in the drawer."
He notes that:
1. S. & P. gave Lehman Brothers an A rating a month before it collapsed, triggering a
2. S. & P. regularly gave AAA ratings to risky and shaky mortgage-backed assets that Krugman says today have turned to "toxic waste."
Why, he writes, "were Moody's and Standard & Poor's willing to bless 80 percent of a pool of dicey mortgage loans with the same triple-A rating they bestowed on the debts of the U.S. Treasury?"
Well, that's no longer the case. Now S. & P. is giving the U.S. Treasury a worse rating. Before you get to thinking that maybe Standard & Poor's has cleaned up its act, maybe it's doing a better job, consider this from Krugman's column.
When the Obama administration got word Friday afternoon that S. & P. intended to downgrade the U.S. debt, it pointed out that the ratings agency had made a $2 trillion error in its calculations. That's no mere decimal point in the wrong place. The agency acknowledged its mistake: and downgraded the U.S. debt anyway.
If all this weren't so destructive, the story line of the United States economy would look sort of like a slapstick comedy. But this comedy is carting away real money, and real jobs, and real homes of ordinary Americans.
It's bad enough that the Republican Party has been taken over by pod people who can't think and can only recite the words "cut, cut, cut" with no real idea of what that means. It's bad enough that the Democratic Party is filled with class sissies who whimper each time Republicans say boo. It's bad enough that President Obama has never met a compromise he doesn't like and cedes the middle ground before most debates even start.
But to have the world economy held hostage by a bunch of B-grade economists making believe they stand for fiscal responsibility? This is the worst joke of all.
Jerry Lanson teaches journalism at Emerson College in Boston. He's been a newspaper reporter, columnist, writing coach and editor. His latest book, "Writing for Others, Writing for Ourselves," was published in January by Rowman & Littlefield.