The View From 1776
Thursday, May 21, 2009
Are We Next?
The credit rating for UK national debt is now under review for possible downgrading. Our turn will come.
The Wall Street Journal reports:
Ratings agency Standard & Poor’s shocked investors Thursday with a formal warning that the U.K. must get its finances in order or lose its coveted triple-A credit rating, underscoring the monumental challenges the country faces as it seeks to dig its economy out from under the wreckage of the financial crisis…
S&P said it will revisit the U.K.‘s rating after the country chooses a new Parliament in elections that must be called by June 2010, effectively tasking the next government with laying out a credible plan to close a gaping budget deficit and stem a sharp rise in the U.K. national debt.
We’ve seen in the United States what happens to individuals and to organizations that pile debt upon debt, on the untenable expectation that income and market values will proceed only upward. The Federal government is no different, despite the fact, or really because of the fact, that the Federal Reserve can create unlimited amounts of money that, to the economically illiterate liberal-progressive, represents real wealth.
Liberal-progressive ignorance leads to the Keynesian economic dogma that all economic problems can be cured by massive, unceasing amounts of deficit spending. Giving voters ever larger amounts of paper money creates the liberal-progressive illusion that voters are again wealthy. But spreading more money over the same distorted and misaligned economy just raises prices without increasing real production of useful goods and services the people here and abroad want and need. More Federal deficit spending ignores the inevitability of inflation that will wipe out people’s savings and corrosively distort investment away from useful, long-term investment.
Deficit spending instead creates massive bureaucracies to impose yet more regulations. So-called green jobs (carbon cap-and-trade regulation, for example) that the Obama administration and Al Gore place so much weight upon are poor substitutes in today’s competitive world for real manufacturing jobs that higher taxes, government-created inflation, and labor union strangulation are driving overseas.
There will be a day of reckoning for the United States, as well as for the UK.