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The Nonsense battle over the "debt ceiling"
Dean Baker, co-director of the Center for Economic Policy in Washington DC gets as close as possible to the truth about the so-called debt ceiling "crisis" in his latest article at Al Jazeera.com.
He points out [correctly] that "[t]he reason that the [budget] deficit exploded from 1.4 per cent of GDP to 10.0 per cent had nothing to do with wild new spending programmes or excessive tax cuts. This enormous increase in the size of the deficit was entirely the result of the fallout from the housing bubble."
What he doesn't say, however, is that the housing crisis in turn was a direct result - DELIBERATELY ORCHESTRATED by the wildly fraudulent and speculative activities of the criminal enterprise, commonly known as the "Federal Reserve Banking System" and its international banking cohorts.
[T]he crisis over the debt ceiling is the answer to the prayers of many people in the business community. They desperately want to roll back the size of the country's welfare state, but they know that there is almost no political support for this position. The crisis over the debt ceiling gives them an opportunity to impose cutbacks in the welfare state by getting the leadership of both political parties to sign on to the deal, leaving the opponents of cuts with no plausible political options.
To advance this agenda they will do everything in their power to advance the perception of crisis. This includes having the bond-rating agencies threaten to downgrade US debt if there is not an agreement on major cuts to the welfare state.
In principle, the bond rating agencies are only supposed to assess the likelihood that debt will be repaid. However, they showed an extraordinary willingness to allow profit to affect their ratings when they gave investment-grade ratings to hundreds of billions of dollars of mortgage-backed securities during the housing bubble. Given their track record, there is every reason in the world to assume that the bond rating agencies would use downgrades or the threat of downgrades for political purposes.
This means that the battle over the debt ceiling is an elaborate charade that is threatening the country's most important social welfare programmes. There is no real issue of the country's creditworthiness of its ability to finance its debt and deficits any time in the foreseeable future. Rather, this is about the business community in general, and the finance sector in particular, taking advantage of a crisis that they themselves created to scale back the country's social welfare system. They may well succeed.
But if they do, it will only accelerate their own demise -- and the harder they push us, the faster and more gruesome that will be.