“Fiscal rot set in years ago”, Congress and White House are doing nothing to prevent financial armageddon
Aug 8, 2011
A number of economists, investors and financial experts have weighed in on the US debt crisis today, following Friday’s S&P downgrade, warning that economic meltdown is close.
Renowned Economist Nouriel Roubini, who predicted the 2008 crash and has been predicting a double dip recession for some time, noted in the Financial Times today that the recent media driven impression of a short term “recovery” was a “delusion that has been dashed.”
“Even before last week’s panic, the US and other advanced economies were odds-on for a second severe recession.” Roubini writes.
“America’s recent data have been lousy: there has been little job creation, weak growth and flat consumption and manufacturing production. Housing remains depressed. Consumer, business and investor confidence has been falling, and will now fall further.”
The New York University professor, who recently warned of a “perfect storm” of fiscal woe converging on the global economy in 2013, states that he believes avoiding another severe recession is tantamount to “mission impossible”.
“Until last year policymakers could always produce a new rabbit from their hat to trigger asset reflation and economic recovery.” Roubini writes. “Zero policy rates, QE1, QE2, credit easing, fiscal stimulus, ring-fencing, liquidity provision to the tune of trillions of dollars and bailing out banks and financial institutions – all have been tried. But now we have run out of rabbits to reveal.”
In comments to CNBC, legendary investor Jim Rogers noted that The US does not even deserve a AA+ debt rating, much less a AAA rating.
“It seems to me it’s physically, humanly impossible for the U.S. to ever pay off its debt ,” Rogers said. “They can roll it over and continue to play the charade, but the U.S. is bankrupt.”
S&P Executive John Chambers told Fox News that a partial reason for Friday’s downgrade was due to the fact that the US political system has proven itself to be “dysfunctional”.
“I think that’s a good word.” Chambers said. “We got to a position where we were within ten hours of having a major cash flow problem. This is not what happens in other countries.”
HSBC chief economist Stephen King weighed in, suggesting that “The downgrade by S&P, the ratings agency, merely confirms what everyone already knew,” namely that “fiscal rot set in years ago” in the US.
“Even before the financial crisis, the fiscal path was unsustainable: an ageing population combined with extravagant social security commitments suggested either the need for massive tax increases or draconian spending cuts,” said King.
Stocks have dramatically slumped this morning with The Dow Jones Industrial Average decreasing 328.92 points, or 2.9 percent, to 11,115.69.
“The U.S. credit rating downgrade extended a rout that wiped out $1.94 trillion in market value from the country’s stocks.” reports Bloomberg.
Asian stocks tumbled with some of the biggest US debt holders warning that the US is acting “immorally” and “irresponsibly”.
Presidential candidate Ron Paul, for years the leading voice for sound monetary policy in the US, responded to the downgrade yesterday, noting “I’m surprised it took them so long to downgrade, I didn’t think (S&P) should have had that rating for a long long time.”
“it’s interesting that when we were working on raising the debt limit, over my objection, they can say ‘well if you don’t raise the debt limit, we’re going to downgrade you’, so we raise the debt limit and they downgrade anyway.” The Congressman added.
Warning of a coming inflationary dollar crisis, Paul stated “The Congress is making even bigger mistakes because they keep talking about slashing and cutting and all this, but there have been no suggestions of cutting anything at all.”
The White House has responded to Friday’s downgrade and today’s financial horror show… well by not saying or doing anything whatsoever.
Steve Watson is the London based writer and editor for Alex Jones’ Infowars.net, and Prisonplanet.com. He has a Masters Degree in International Relations from the School of Politics at The University of Nottingham in England.
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