August 7, 2011 - 11:31pm ET
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There have been many reactions to S & Ps action in downgrading the credit rating of the US, Apart from the widespread annoyance and repudiation of S & P and its procedures, there are some who are saying that it won't have much effect on interest rates. Others even saying that it is a “non-event,” and still others saying that S & P should be investigated and prosecuted on a number of grounds. However, I found two views of the “non-event” particularly interesting.
The first was Warren Buffet's quoted by Fox Business news:
Berkshire Hathaway Chairman and CEO Warren Buffett told the FOX Business Network that S&P's downgrade of the United States' triple-A credit rating "doesn't make sense."
"I don't get it," Buffett told FBN late Friday night. In fact, Buffett reaffirmed his belief in the quality of the United States' credit telling FBN, "In Omaha, the U.S. is still triple A. In fact, if there were a quadruple-A rating, I'd give the U.S. that.”
Buffett also said:
"Think about it. The U.S., to my knowledge owes no money in currency other than the U.S. dollar, which it can print at will. Now if you're talking about inflation, that's a different question."
And so, now we know that Warren Buffett gets a fundamental premise of MMT!
He knows that the US cannot become insolvent because it can make USD at will and it owes nothing that is not denominated in USD!
We can only hope that he'll clue in his friend Barack Obama that the US is NOT running out of money. Perhaps Mr. Buffett even knows about Proof Platinum Coin Seigniorage (PPCS) and he can tell his friend Barack that using it would be a good way to give S & P a sharp stick in the eye.
The other reaction was one to my post on S & P tugging Superman's cape. The commenter asserted that, considering the US Government's domination by an increasingly powerful oligarchy, “the US Government is not Superman.” This squares with views being expressed by Yves Smith and others that this downgrade is about a power struggle. People who write about this struggle characterize it differently.
I think it is a power struggle between sovereign nation states and globalizing international elites whose loyalties are to the emerging new international feudalism in which corporations and enormously wealthy individuals wield the only real power. Some write as if they think that nation states are already and irrevocably subordinate to international elites. But I think that is not yet true.
The forces of nationalism are not yet spent, and will still be used against the international elites when the reality of their growing power and its negative impacts on working people are both fully recognized. People still need nation states for physical protection. People without a favored position in the emerging plutocracy still owe their primary loyalties to their nations, and I don't think they will long accept the subordination of their national Governments and institutions to foreign powers, whether those are other nations or international financial interests. At the moment, the influence of globalizing elite institutions is very great and very real; but they still exist and function on the sufferance of nation states and their internal politics, however parasitical they may be.
Even with all its faults and the mess being made by the special interests and the parties, the US is still Superman if we can free ourselves from the constraints imposed by various Congresses in the past, and from the financial lilliputians.
1. As I say in this piece, and Marshall Auerback says in this one, the US (the Fed and the Treasury) can control interest rates contrary to the desires of the bond markets and the vigilantes. There is no realistic prospect that benchmark interest rates will go up unless the Government wants them to.
2. The US can also de-certify the ratings agencies and prosecute rating agency executives for fraud and other violations. I think they'd be well-advised to do so, if only to show S & P who's boss. And
So, forgive me my optimism, I still think that's Superman!
(Cross-posted from Correntewire.
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