PostHeaderIcon The S&P Downgrade

All the talking heads are now focused on the S&P downgrade of U.S. government debt, and speculating whether other rating houses will follow suit. I find that a very uninteresting discussion.

Why aren’t the professional blabber-mouths discussing a more fundamental question: How the hell does any entity get an AAA bond rating when it has a multi-trillion dollar debt that is growing out of control and that cannot conceivably ever be paid???

Might I hazard an answer to my own question? My analysis is that the principle amount of the debt simply does not matter.

How can it not matter? Simple. The principle amount supposedly owed does not matter because the money in question never existed to begin with. When you borrow what does not exist, who really cares whether you ever pay it back. Even if it were paid back, it would be paid in kind. That is to say, a debt of money that never existed would be paid back with other money that never existed.

You may well ask, at this point, why do we care at all?

We care because the whole point of this exercise is that the INTEREST paid on this debt is very real money. It is money extorted from the producers all over the nation. And, since we never pay down the supposed debt, the INTEREST is with us permanently. The S&P downgrade matters because it will likely raise the rate of this interest even higher.

Between the increasing rates on the interest, and the additional interest that must be paid on the additional sums of non-money the government is borrowing, eventually the overall amount of interest that must be paid will consume every last bit of wealth the producers are able to produce. Obviously, we will have failed as a nation long before such a point is reached.

How close are we at this moment? I’m not sure we are ready to deal with the answer.

Is the conversation “interesting” yet?

Think about it.

Troy L Robinson

4 Responses to “The S&P Downgrade”

  • The interest is no more or less real than the money that started it. This is money that will eventually be payed back with money that is worth less than the original, even with the interest added. There is little question that we will pay it back, but with what?

    If we ignore the currency for a moment and just look to the transfer of wealth, what has happened here? People all over have lost wealth in order to feed and house other people who just sit around and consume it while pushing imaginary numbers around. We should count our regulators, politicians, and bankers among the recipients of welfare checks. It would be a more honest representation of what they bring to society.

    • Well said Steel. That states succinctly a point I was making in my “Who Really Pays Taxes” essay. You will notice none of these parasites pay any taxes either, because paying a tax-spender enough to pretend to give some of it back as taxes, creates no new revenue for the government. It is just moving it around between bank accounts. Only private sector producers, who actually create the wealth, really pay any taxes.

    • Troy says:

      While I agree with your overall analysis, I still contend that the interest money is more real than the debt. The latter was financed with dollars created from other debt. The former (the interest) is paid with the wealth seized from the producers. That is the whole dirty secret behind the Fed and its ability to raid our society for the benefit of a few ultra-rich financial manipulators. This group includes the Rockefellers, the House of Rothschild, the royal family of the Netherlands, etc., etc., ad nauseum.


  • I get your point that the source still matters. I’m not sure the sources are as different as you say. The Treasury doesn’t differentiate between why it is out of money, it just sells more treasuries (ceiling allowing). The Fed doesn’t much care either, they are just working to protect their investments by attempting to prevent inflation. If the debt ceiling allows, they will go into QE3 to keep interest rates down. They’ll both keep the game going until the bitter end, when the tide turns against the Dollar.

    I’m of two minds on the whole money thing. As much as I support the return of gold to its rightful place, I also think that if we are going to be running a fiat currency, we might as well game a system that was designed for just such a purpose. I can’t reconcile the concept that China is winning the economic war by devaluing their currency, yet we are supposed to fix ours by over-valuing the Dollar. The Dollar shouldn’t be considered wealth, but instead a short term medium of exchange.

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