08:50 – I just followed Barbara out to the body shop, where we dropped off her car. The guy told her yesterday when she stopped by for an estimate that it was a “pound-out” job, and that he wouldn’t need any replacement parts. We’ll pick up her car tomorrow afternoon or Thursday morning. Meanwhile, Barbara is driving my Trooper, which used to be her Trooper. The insurance company offered a rental car, but it’s not worth the hassle for a two-day repair.
Work continues on the biology book. I’m also ordering stuff to prototype the biology lab kit.
09:09 – I see that S&P has just been downgraded to junk-rater status, leaving Moody’s and Fitch as the only real ratings agencies. As the federal government pointed out at the time, S&P made a $2 trillion dollar calculation error, without which the US rating would have remained AAA even under S&P’s modified rules. I think Warren Buffett spoke for most knowledgeable people when he said that rather than reduce the US credit rating from AAA to AA+, S&P should have increased it to AAAA. The simple truth, as evidenced by bond yields and CDS prices, is that the market considers US debt to be by far the safest in the world, far better than that of other countries that are rated AAA. If Moody’s and Fitch have any sense, they’ll create a new AAAA or even AAAAA rating and award it to the US and only the US.
12:09 – The much-anticipated conference between Merkel and Sarkozy started a few minutes ago. I’ll predict that they’ll do nothing but talk. That’s understandable, because there is no action they could take that would save the Euro. They’re powerless, so they might as well have a nice chat. I very much doubt they’ll do anything other than agree to support the decisions made at the 21 July summit, which of course is and was a joke. Sarkozy will be pushing for boosting the ESFS, which Merkel and the Germans will refuse to pay for. Sarkozy will also be pushing for Eurobonds, which again Merkel and the Germans will refuse to pay for. Ultimately, the problem is that almost all of Europe is bankrupt, with huge debts that they have no hope of ever repaying and economies that are so unproductive that most of them aren’t even keeping up with population growth. What should happen is that Germany, Holland, Austria, and Finland abandon the Euro and let those profligate countries that remain on the Euro go bankrupt. I’d like to see that announced after the conference, but the chance of that happening is nearly zero.
While S&P may have been premature in their downgrade, I think the US has a serious debt problem. The reason we have a serious debt problem is we have a serious spending problem, made worse by the current occupant of the White House and his belief that the only problem is that a relatively few rich people don’t pay enough taxes.
If we don’t change our ways, one day we’ll wake up and our situation will be as hopeless as the one the Greeks now find themselves in. If S&P is for once delivering the bad news early, then I hope someone listens before it is too late.
Why of course we have a debt problem. A huge problem. A gigantic problem. But the sad fact is that we’re still in great shape compared to the UK and the Euro zone. We still have time to fix the problem. The Euro is terminal. There’s nothing that can be done to save it. Eurobonds and a transfer union can stave off the crash for a short while longer, but Europe is going to crash sooner rather than later. Even if the Euro had never been introduced, Europe in general would still be terminal right about now. The fundamental problem is government spending and taxation at levels sufficient to kill any economy. That’s been going on for several decades now, and the chickens are now coming home to roost.
Merkel and Sarkowsky gave a joint press conference yesterday. They are completely unwilling to abandon the Euro – I think there is too much national pride tied up in its creation.
Some analysts had proposed “Eurobonds” – an utterly stupid idea that would have allowed the bankrupt countries to continue borrowing, with all the other countries co-signing the loans. At least Merkel and Sarkowsky refused this idea.
Instead, they are proposing a European economic board, to which individual countries would surrender their sovereignty on financial matters. (I’m sure some professional translator would make that sound better.) It’s still a stupid idea, just less so. If there really are no loopholes allowing continued irresponsibility, none of the countries needing rescued will sign it. Otherwise, it will be yet another useless Eurobureaucracy, and life will continue down the path to bankruptcy.
“Some analysts had proposed “Eurobonds” – an utterly stupid idea that would have allowed the bankrupt countries to continue borrowing, with all the other countries co-signing the loans.”
I’d take “analysts” like that seriously if they proposed moving their own savings, retirement funs, etc., in to such bonds. They won’t, so I don’t take them seriously. Just like Greens who want everyone else to reduce their impact on the environment but keep their own cars, old growth timber floors, houses build using river sand, and so on.