Tuesday, August 09, 2011

Washington's New Clothes

The Emperor didn't actually have a problem until that little sh*t pointed out that he had no clothes. So, technically, it is correct to blame the Tea Party for the downgrade.  Until the Tea Party Caucus forced the issue, everyone, including S&P, was willing to go along with the polite fiction that we were just about to address that looming debt problem.  Any minute now. Perhaps after the next election. Or the next.

I suspect the problem was less the Tea Party Caucus threatening not to raise the debt-limit and more that even with the Tea Party Caucus threatening not to raise the debt-limit, this Washington-style spending cut ("we were going to borrow $10 trillion we can't pay back, but we'll be frugal and only borrow $7 trillion") was the best offer available.  That essentially told the markets that we have no intention of putting on some clothes dealing with the debt.

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