Oligarchies are most effective when they work in the background, out of the public eye, getting their way by having political leaders carry out their bidding. The oligarchy usually prefers to use establishment academics and the media and the bond rating agencies to speak on their behalf but they seem to have become worried that those subtle, behind-the-scenes ways seem to have failed when it comes to raising the debt ceiling, forcing them to come out more in the open.
Wall Street has pretty much openly told the Republican party leadership that the kabuki theater had gone on long enough and to raise the debt ceiling. In a highly unusual move, a broad segment of the oligarchy sent an open letter to Obama and every member of Congress (though I suspect that the real targets were the debt-ceiling holdouts) that the ceiling must be raised.
Warren Buffet played his usual role of speaking for the ‘soft’ face of the oligarchy (i.e., the down-home, aw shucks, ‘good’ rich guy) when he publicly predicted that the ceiling would be raised. A ‘prediction’ of this sort is usually just a hint as to what the speaker wants others to do. Ben Bernanke has also warned of the dire danger of not raising the ceiling.
The major bond ratings agencies like Moody, Fitch, and Standard and Poor have warned that the US government’s credit rating would be lowered if it defaulted. The opinions of the ratings agencies should be highly discredited since these were the same agencies that gave the highest ratings to the worthless mortgage-backed securities that fueled the madness that led to the collapse of the housing market that has harmed so many people. But while their assessments of credit worthiness are worthless, they are a major voice by which the oligarchy makes its views known.
Although the debt-ceiling negotiation drama has continued, what made me think that there would be no default is that the ultimate voice of the oligarchy, the stock market, has remained seemingly unperturbed. If there were real fears of a default, it should have tanked. While that may still happen, so far the oligarchy seems convinced that the ceiling will be raised. Commentator karoli sees things slightly differently, suggesting that the reason for the stock market’s stability is that the oligarchy does not want a budget deal because they care more about keeping their taxes low than about higher interest rates. They would prefer no deal, even if it results in a US government default, if the alternative is a deal in which their taxes are raised.
Economist Paul Craig Roberts, former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal, is another formerly solid establishment economist, a conservative counterpart to Jeffrey Sachs, who like him has become shrill. In a must-read analysis, Craig says that:
The downgrade threat [by the credit ratings agencies] is not credible, and neither is the default threat. Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.
Washington’s priorities and those of its presstitutes could not be clearer. President Obama, like George W. Bush before him, both parties in Congress, the print and TV media, and National Public Radio have made it clear that war is a far more important priority than health care and old age pensions for Americans.
The American people and their wants and needs are not represented in Washington. Washington serves powerful interest groups, such as the military/security complex, Wall Street and the banksters, agribusiness, the oil companies, the insurance companies, pharmaceuticals, and the mining and timber industries.
Craig argues that even if no debt-ceiling deal is reached between Obama and Congress, there will still be no default because the US is in the unique position (unlike Greece and the other European countries also struggling with debt) that it pays its debt with its own currency.
The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury’s debt. If Goldman Sachs is too big to fail, then so is the US government.
I must admit that I don’t understand in detail how US deficits are financed. The relationship between the US Treasury and the Federal Reserve, the way that US Treasury bonds are bought and sold, the way that new dollars are printed to finance the debt, are all things that are somewhat opaque to me but Craig is the kind of person who would know.
Paul Krugman is an establishment economist who has so far has remained within the approved range of ‘respectable opinion’, viewing the Democrats as liberal and the Republicans as conservative and the failure of Democrats to exploit their winning hands and snatch defeat from the jaws of victory as being largely due to their poor negotiating skills. But the debt ceiling debate has exasperated even him and he has started saying some shrill things. I don’t know how far he can go before he too gets booted out of the Village.
How many more establishment economist types need to become shrill before the message gets through to the general public that it is the domination of the US economy by the oligarchy that is the real problem here, not the debt ceiling or the budget or Social Security or Medicare or Medicaid? These people and their enablers in government and the media are driving the US into a very deep ditch.