Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Greece Debt Crisis to Trigger Euro-zone Credit Freeze, Expiry of Greek Euro Bank Notes - 7th July 15
SPX Sinking Premarket - 7th July 15
Marc Faber Warns: “Wake Up, People Of The World! Greece Will Come To You …Very Soon” - 7th July 15
The Greek Vote and the EU Miscalculation - 7th July 15
SPX Stocks Index Still on a Sell Signal - 7th July 15
Bill Gross on Greece: 'We're in the Eye of the Hurricane' - 7th July 15
Dow Stocks Bear Market Underway - 6th July 15
Marc Faber Warns of Greece Crisis Contagion Very High Risk - 6th July 15
Greece to Print Counterfeit Euros or IOUs, Hyper-Inflation Beckons - 6th July 15
Stock Market, Investing Big Picture - 6th July 15
“Oxi!” - Greeks Defy EU As Varoufakis Resigns To Ease Tensions With “Partners” - 6th July 15
Stock Market Rally in a Downtrend? - 6th July 15
Silver Price Consolidating Ahead of Another Sharp Drop - 6th July 15
Gold Price Gravitating Lower Towards $1000 - 6th July 15
Syriza Convinces Greece to Commit Suicide, GrExit Beckons, Market Reaction - 6th July 15
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

U.S. Debt Rating Downgrade, S&P States the Obvious

Politics / US Debt Aug 15, 2011 - 06:45 PM GMT

By: Dr_Ron_Paul

Politics

Politicians did not get much time to pat themselves on the back for supposedly rescuing the economy with the debt limit deal last week. The ink was barely dry when Standard & Poor's downgraded the US debt ratings anyway, roiling world financial markets. Anyone who has taken an honest look at the government's fiscal situation, taken into account how Washington works and the direction it is going would have a very difficult time arguing with S&P's decision, although a strong case can be made that this was too incremental a downgrade and that it took far too long for S&P to admit the obvious.


Nonetheless, the administration nitpicked over a $2 trillion "mistake". S&P rejoined with the fact that $2 trillion here or there hardly makes a difference in the time frame under discussion. That, if nothing else, should tell you the magnitude of the problem. $2 trillion has become a drop in the bucket.

S&P cited Congress's inability to act like grownups and make necessary, meaningful cuts, which is true. I must take issue however, with their suggestion that tax increases are part of the answer. Taking capital out of the private sector, where it can create real value in the form of new jobs and products, and instead giving it to Washington to waste and squander is not the solution. Tax increases may seem penny-wise to some, but in reality they would be very pound-foolish. The government currently takes in $2.2 trillion in taxes per year, which is far too much already. It spends $3.7 trillion, which is ridiculous and criminal. The problem is runaway government spending, not the American people having too much money.

And yet we can't even have a serious discussion about bringing our troops home and ending our expensive occupations around the world - things the president used to claim to favor!

Even without this downgrade, major investors are waking up to what lies down the road for the United States in fiscal terms. China is showing more signs of losing its taste for our debt. Others are following suit. What we are about to see is the end of the dollar as the reserve currency of the world. When that happens, we will no longer be in a position to have pretend debates about things we probably should spend a little bit less on - we will be forced to implement serious spending cuts as our sources of credit dry up. Of course, we can try to postpone the day of reckoning by printing more money but the resulting "inflation tax" will be far worse than a reduction in government benefits.

Hyperinflation devastates the middle class. After Weimar Germany hyper-inflated their currency in the 1920s, an entire life savings couldn't buy a postage stamp. The bank wouldn't even send customers a check for all the money they had saved their whole lives. It wasn't worth the paper it was printed on or the stamp to send it. This is what is meant when it is said that the middle class gets wiped out. The pieces for this to happen here are all falling into place, and have been since 1971. The only way to avoid that sort of chaos now is for Congress to immediately reduce federal spending and take the Constitution seriously again. The welfare/warfare state will end either way, but winding it down responsibly is a far better way to do it.

Dr. Ron Paul
Project Freedom

Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.

Dr. Ron Paul Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History