Standard & Poor's officially took away
their AAA credit rating for the United States yesterday. Anticipation of this likely was the cause of the large drop in the market on Friday, and when markets reopen on Monday there will likely be another drop. Growing fears that the United States recession is about to take a downturn and be worse than before, on top of the Euro crisis, are making people jittery. The Eurozone crisis is making people even more upset than before because Italian Prime Minister Silvio Berlusconi has ruled out calling for early elections to get him out of office and allow a new government to solve their debt debacle. All in all, though, I don't think any of the reactions to the credit downgrading were all that surprising.
China: A lot of saber-rattling about changing the world reserve currency away from the dollar and telling the USA that it is fiscally insane, all-the-while ignoring their own impending crisis. "China, the largest creditor to the world's sole superpower, has every right to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," said the Chinese government. I think there was something tongue-in-cheek on the superpower comment. China also said that the United States needs to stop letting its domestic electoral politics hold the global economy hostage. The U.S. government ought to have responded with something nice about liberty and rights and politics and such, but President Obama seems to agree with China's view on government administration.
President Obama: The president is, true to form, standing behind a microphone and blaming partisanship in Congress for the credit downgrading. "Both parties have to work together on a larger plan plan to get our nation's finances in order." Too bad the Democrats insisted that there be no further discussion of the debt ceiling until after the 2012 elections.
Secretary Geithner: The Secretary of the Treasury is mulling quitting his job as some conservatives demand his resignation
for things like saying in April that there is "no risk" at all of a credit downgrade. The Treasury, for its part, is officially disputing the logic behind the downgrade. Okay. Good luck with that.
GOP Candidates: A lot of blaming Obama for everything
and not making any suggestions on how to solve our debt problem other than the typical vague talking points.
Europe: British Prime Minister David Cameron, German Chancellor Angela Merkel, and French President Nicholas Sarkozy all happen to simultaneously be on vacation this weekend. Really. That's Europe for you.
Friends: Japan, South Korea, and Australia all said everyone else is overreacting
, they're keeping an eye on the situation, and economic cooperation between nations should remain strong right now. Australia was also quick to point out that the other two international credit rating agencies still have the United States at AAA.
All-in-all, I'm with Australia and Japan on this one insofar as people are overreacting to the downgrade and placing too much importance on what S&P thinks of the United States. As hypocritical as the Chinese complaints are, they have very good points about the United States reaching a point where we must realize we cannot borrow our way out of problems anymore. Additionally, ignoring the plunge in the stock market for a moment, the bond markets in the United States and Europe are offering
far more cause for concern. But our government, despite this tumult surrounding us, will not sit down and figure out a way to solve the problem. As Pete points out below
, we need a new person in the White House if there is to be any hope of averting disaster, and whoever that person is needs to be able to have a conversation with the American public about why we need true reform.