In April 2010, Treasury Secretary Timothy Geithner said there was “no chance” Treasury bills could lose their AAA rating. The fact that top government officials thought there was “no chance” something could happen surely is one reason it happened.
U.S. government bond ratings are falling — the S&P downgraded the US credit rating yesterday from AAA to AA-plus, the stock market is plummeting — such movements don’t necessarily have story lines like Hollywood movies. Herd instinct and randomness are factors. Even top economists can’t agree on exactly why the Dow headed south.
But the bond rating drop unequivocally is a direct result of the Barack Obama-John Boehner national-debt deal being as phony as a three-dollar-bill.
Stocks for their part began to fall two weeks ago, on rumors the Obama-Boehner deal would contain nothing but pandering. The drop accelerated – 6.1 percent of the 10.5 percent decline – pretty much to the hour, on Monday, when the deal became final and it was clear that reports were correct. Monday, markets learned that people at the top of the government of the United States were going to do nothing at all about the national debt, beyond acting like windbags.
America had been elaborately warned that endless borrowing to appease interest groups doesn’t work – the warnings have come from Greece, Ireland, Portugal and most of all from Japan. President Obama and congressional leaders of both parties ignored those warnings and ordered another round of champagne, agreeing to a deal that includes $2.4 trillion of fresh borrowing by 2012, paired with only $21 billion in specific cuts in the same period — about $115 spent for each $1 saved.