In an extremely important story that was all but ignored by the US media, the prestigious S&P rating agency has sued the US government for exerting “retaliation” against S&P for downgrading the US government’s credit rating in 2011. S&P’s lawsuit charges the US government retaliated against S&P for exercising its First Amendment rights in evaluating the creditworthiness of the US federal bond markets. The first two links [1, 2] offer you specific details about this critically-important lawsuit. In my opinion, its exclusion from any serious American media coverage proves just how important this lawsuit really is.
If the lawsuit is upheld, it means (A) the US government is resorting to criminal means to hide its financial wrongdoings and (B) the US rating agencies are maintaining their currently high US bond ratings only because they fear retaliation from the US government which wants to hide from the American people just how bad things really are in the federal bond markets.
A brief review is in order. The rating agency’s job is to rate the creditworthiness of both public and private entities. Theoretically, they should be able to do so free of intimidation and behind-the-scenes threats from the entities being rated. Their independence is vital for investors to make proper decisions about what to do with their invested money. When S&P downgraded US bond ratings in 2011, Moodys and Fitch and other major rating agencies, did not do so. At the time there were some questions raised why they did not follow suit, given the wild monetary and debt expansions of the US federal government.
I’m a financial layman, not a financial advisor of any kind, but here is my layman’s opinion of what the reality of the US federal finances are at present. We all know that the US Federal Reserve can create money out of nothing by lending it into existence. The Fed is sometimes called “the lender of last resort.” Fed Chairman Bernanke, sometimes referred to as “helicopter Ben” in the financial media sources, for his inclination to increase the money supply in any fiscal crisis, has led the US Federal Reserve in a process euphemistically called “quantitative easing” for years. In layman’s terms, this could be called creating “pretend” money and buying US treasury bonds or other federal agency debt with this “pretend” money because there are no buyers in the real world who want to invest real money in buying the federal government’s debt offerings. Ordinarily in a normal “supply and demand” market, when the supply of something vastly exceeds the demand for that something, the price of that something has to drop considerably to bring a market into balance. However, that has not happened in the US federal debt markets because the fed is creating “pretend” money to give to the federal government to spend as if its were “real” money. How long this deceptive scheme can go on is anyone’s guess.
The fact that the US federal government wants to spend an immensely-greater amount of money that anyone in the world wants to lend to it means the supply of US debt instruments greatly exceeds world demand for them (especially when US bonds pay virtually no interest at all). In order to prop up the Treasury bond and US dollar markets from the drops that should occur to bring these markets into proper balance, the US Federal Reserve Board has lent, apparently, trillions of dollars to the US federal bond markets to keep them afloat so their value won’t drop to where they would ordinarily go in a free market. It is the classic case of the “Emperor has no clothes” story. The US Fed and the US financial media use such incomprehensible terms as “quantitative easing” to obscure the fact that the US government’s spending is being financed by “pretend” dollars that didn’t actually exist until the Fed lent them into existence. This kind of policy used to be called “banana republic” financing, but it is now being used by the US federal government to sustain its incredible level of overspending. If a small nation was doing what the USA is doing, the IMF would likely step in to stabilize the out-of-control spending by the banana republic, its currency would have to devalue to a point where equilibrium was restored in its marketplace value and it would be placed under some kind of global “receivership.” However, the USA has the global reserve currency so this is a gigantic problem the USA would like to sweep under the rug. However, the pile of “pretend” money being created by the Fed so it can lend this “pretend” money to the US government to spend is now getting so huge it is very hard to hide.
When S&P lowered the US federal government’s bond rating in 2011, it took a “baby step” in the direction of lowering the US bond rating to a lower level that the US government’s “banana republic” financing schemes would ordinarily deserve. As numerous financial media stories have reported, the Fed has been creating $85,000,000,000 per month for some time to create the amount of “pretend” money needed by the US federal government to support its spending habits. No investors in the world want to buy this amount of US federal debt. There has been some reduction recently to $75,000,000,000/month or even lower, but this is still wild monetary expansion and abuse of the US dollar supply. The real amount of “pretend” money created by the fed is unknown as the spineless US Congress has not done a forensic audit of the Fed to determine the real amount, not just the publicly-announced amount.
Normally, when the “printing presses” create so much excessive money in a national economy, the inflation rate skyrockets due to the increased money in circulation. However, the US Fed has been very clever. It’s wild monetary expansion has not been a result of running the printing presses to put more money into circulation on the street, its monetary expansion has been focused on increasing the supply of digital money given to the US government, the big Wall Street banks and the “Wall Street” crowd instead of “Main Street” Americans. Also, the low inflation rates reported by the US Department of Labor have long been a farce–under both GOP and Democrat administrations. The real inflation rate has been tracked over the years by shadowstats.com, and I urge readers to check out their website to see the extent to which their expert statisticians conclude the US government understates inflation. If you are unafraid of seeing the truth, check out the shadowstats.com information. As I noted, their calculations are done by expert statisticians.
Personally, my own layman’s opinion is that if the rating agencies had to honestly rate the US Treasury bond market, it would have to be given a “junk bond” rating because the Fed is creating gargantuan amounts of “pretend” dollars to finance the wild spending habits of the US federal government that no investors anywhere in the world are willing to support. Do you think this is just a negative assessment by this author? Hardly. The last link reports that a rating agency for China, America’s largest creditor nation, has dramatically downgraded the ratings of US government debt to an A- rating, several levels below the modest downgrading of US debt by S&P to AA+. This downgrading of US federal debt by a Chinese rating agency has been all but hidden from US citizens. It is my view that this downgrading has been hidden from Americans as the federal government wants to hide from US voters just how bad a job the Obama administration (and previous administrations as well) have been doing in running the financial affairs of the USA.
As I’ve noted in many previous posts, the Bible prophesies in Revelation 17-18 that the global financial/monetary system in the “latter days” will experience a very painful and global collapse. It almost happened in 2008 when then US Secretary of the Treasury Paulson warned the global US Dollar-based monetary system was within hours of collapse. The S&P ratings agency is suing the federal government to expose the intimidation being done by the US government against ratings agencies to prevent them from lowering the US government’s bond ratings to a level that is really deserved. It is my opinion that the S&P ratings agency’s lawsuit is right on target. It is my further opinion that if there were no government intimidation preventing honest appraisals by the rating agencies, the ratings for US federal bonds would be near or at junk-bond levels. Since “pretend” money has to be created in incomprehensively high levels each month to support the overspending habits of the US government, how could it be otherwise? How long will it be till the prophesied events of Revelation 17-18 occur? I don’t know. However, S&P’s lawsuit makes it clear that at least one ratings agency would like to tell the truth, but it fears doing so due to government retaliation. For more information on the specifics of the prophecy in Revelation 17-18, please read my article, Is Babylon the Great about to Fall, Ushering in a New “Beast” System? Since none of us knows when this prophecy will be fulfilled, this article is as relevant today as the time in which it was written.
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