Monday, August 22, 2011

If The U.S Government Was A Public Corporation, Our Bonds Would Be...Junk

I mulled over this post title; after all, isn't the United States Government a public corporation already, with almost 300 million shareholders voting on all levels of executive officers?  I suppose, but in a real corporation, executive officers as incompetent as ours could be fired mid-contract...

Anyway - the New York Post's John Crudele does a little Q&A on the aforementioned question:

QCan you put S&P downgrade in perspective by comparing what rating they would give the US government if our country were rated as a corporation? ~Jeff

Dear Jeff:  Our securities would be junk grade, according to Anthony Sanders, an economist and Mercatus scholar at George Mason University.

S&P downgraded the US Treasury debt because our debt and spending have been growing at astronomic rates, says Sanders. Worse, debt is growing at a time when the economy is expanding by less than people thought it would.

“When you look at our Medicaid, Medicare and Social Security entitlements, they are about 450 percent of current GDP. So what S&P did was perfectly reasonable,” says Sanders.

The US, of course, can print all the money it wants to pay its bills. So that’s why the rating isn’t lower.

The trouble is, the more money a country prints, the less people trust that currency. The phrase “it isn’t worth the paper it’s printed on” comes to mind.

On the way to the supermarket to buy a loaf of bread in Germany, 1923.  When it happens in America, we will refer to our new million-dollars bills as "Obamas"...

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