Out with the old, in with the new. Oh, I don’t like austerity but certainly you couldn’t argue that the country needs some fiscal responsibility and restraint against spending. Maybe a new attitude isn’t far behind. I know many are viewing this credit downgrade negatively, we are certainly getting an earful from the media (for the second week in a row they have our attention). It took S&P to give Washington a wake up call to be responsible and stop running up the credit card. In fact, I would think they have cut it up for them since they ran our debt to insurmountable levels. Can’t control your spending? Well, now there are consequences. Let’s hope it’s not too late to make the changes necessary to put our fiscal house in order. Perhaps it’s the kick start we needed.
Fixing the Problem
Speaking of out with the old – how about some turnover in Congress and Senate? I know we are a year away, but is there anyone who was not embarrassed to be an American with that political debt ceiling circus? I would love nothing more than throwing them all out and getting a do over. Is that the way our founding fathers thought government should be run? Not by a long shot. I don’t despise government, I just despise too much of it. Let’s keep government out of our business, foster a growth environment for small business, hiring and enable higher education. Cut spending – that’s a great start but true reform seems to be elusive. Energy dependence has been a problem for years, our current politicians pray at the altar of big oil companies. Remove them from these powerful positions and replace them with new, energetic thinkers who can put us on a path of energy independence. Maybe some recent programs like Obamacare removed would also be a step in the right direction.
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The Rest of the World is Watching
As the leader of the free world, the USA is being watched closely. The Chinese are big holders of our debt because they trust they will be paid back fully with interest. They have been quite vocal and disappointed – for good reason. At the very least they expect a responsible government with good behavior that will make tough decisions when necessary.
This from reuters today:
China, the largest foreign holder of U.S. debt, took the world’s economic superpower to task for allowing its fiscal house to get into such disarray. It also revived its calls for a new stable global reserve currency to replace the U.S. dollar, gaining a sympathetic ear in the United Kingdom. “The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” China’s official Xinhua news agency said in a commentary. Xinhua scorned the United States for a “debt addiction” and “short sighted” political wrangling. China, it said, “has every right now to demand the United States address its structural debt problems and ensure the safety of China’s dollar assets.
Others around the world are watching for our leadership – Japan, Australia, Britain, Canada and Germany. Many were laughing at us last week. Regardless of how bad our fiscal situation may be there is just no excuse for not being responsible.
The Little Man with the Beard
Chairman Bernanke is going to get busy once again dumping bags of money from helicopters. With a weakening economy he’ll have to once again pull a rabbit out of the hat to get things rolling once again. The purge to riskless assets makes for a big challenge but he is now in the hot seat to get something going. The recent QE actions did not stir much growth and did little to reduce the jobless rate. But let’s not underestimate the power of the Fed. We’ve seen what they could do with a bazooka (thanks, Henry Paulson), fighting off the biggest financial crisis ever, bringing the country (and the world) back from the brink.
