I Am a Tool of the Government
The Chinese government, I should clarify. A new Chinese rating agency had this to say about US government debt:
Dagong has downgraded the local and foreign currency long term sovereign credit rating of the United States of America (hereinafter referred to as “United States” ) from “AA” to “A+“, which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment.
The serious defects in the United States economic development and management model will lead to the long-term recession of its national economy, fundamentally lowering the national solvency. The new round of quantitative easing monetary policy adopted by the Federal Reserve has brought about an obvious trend of depreciation of the U.S. dollar, and the continuation and deepening of credit crisis in the U.S. Such a move entirely encroaches on the interests of the creditors, indicating the decline of the U.S. government’s intention of debt repayment. Analysis shows that the crisis confronting the U.S. cannot be ultimately resolved through currency depreciation. On the contrary, it is likely that an overall crisis might be triggered by the U.S. government’s policy to continuously depreciate the U.S. dollar against the will of creditors.
I wholeheartedly agree with everything in the above analysis. Alas, here is what Paul Krugman has to say about their assessment: “Way to build credibility, guys — just in case anyone wondered whether Dagong would be truly independent, or just a tool for Chinese policy ….”
It’s funny how so many people around the world are tools of their governments. Only a fool could possibly disagree with quantitative easing.
Well that’s it. His comments put me over the edge, I’m going to donate to the debate right now. God, I can’t stand that guy.
Robert Fellner
“I wholeheartedly agree with everything in the above analysis”
Which means you agree with this part of the analysis:
“which reflects its deteriorating debt repayment capability and drastic decline of the government’s intention of debt repayment.”
So really, we don’t need a Murphy / Krugman debate. All we need is the passage of time to show how wrong you and the Chinese rating agency are.
We still need the debate. Think of the food bank.
The passage of time wouldn’t be enough….one would need a large amount of gags for Austrian mouths. Ironically, it seems Chinese tactics are necessary to defend Keynesian doctrine these days. Hopefully Krugman will prove me wrong in the debate… I’d really hate to see him in the unemployment line ; )
Even if the U.S. gov. inflates its debt, it can only do so to the degree its willing to increase prices, so even if currently bankruptcy is not likely, it still stands that government can’t spend forever.
I hope you don’t take this the wrong way, but I have always kind of thought of you as a paid stooge of the People’s Republic.
This post’s title reminded me of your former campaign poster: “Hillsdale Tool.”
When I was a professor, I gave those posters to the libertarian remnant in the ATO house, before I drove off into the sunset.
Nearly as important as the substance of Dagong’s statement is its perception. If Dagong and others believe the intention of the U.S. to repay its debt is in question, debt service costs will outstrip any of the Deficit Commission’s reduction ideas if implemented.
Country thinker,
You write:
“If Dagong and others believe the intention of the U.S. to repay its debt is in question, debt service costs will outstrip any of the Deficit Commission’s reduction ideas if implemented.”
Implementation of of the Deficit Commission’s reduction ideas would presumably make Dagong, other bond raters and bond buyers more confident in the intention of the US to repay its debt, and the rating would come back up.
Bob,
How many of the countries criticizing QE2 aren’t worried about their exports being hurt? Americans are being led to support policies against their interests by foreign propaganda, such as this Chinese rating downgrade.
The markets disagree with this rating agency, so which is right? What’s a free market libertarian supposed to think?