Today was a painful day to be a capitalist--either of the left wing or right wing variety. Stock markets all over the world--and especially here in the United States--suffered terribly in the wake of Standard & Poor's announcement of its first-ever downgrade of its assessment of the credit-worthiness of US Treasury debt. The financial carnage was so great that just about the only asset class that gained in value was that of US Treasury debt.
Wait a minute--that can't be right, can it? The financial instruments that have now been deemed by a major rating agency to be more risky than they used to be are actually now more attractive to investors than had been the case before the announcement?
Yes and yes.
No jokes or entertainment here today; this edition is all in earnest.
If you want to read the S&P announcement you can easily do so by browsing over to the company's web site at http://www.standardandpoors.com/home/en/us; as of today, the report is readily-available there. I have read through it. But if you do read it, you might want to just go through it quickly and not dwell on it, because apparently the investment community that buys and sells US Treasury bonds came to the general conclusion that US debt is better than ever. There is an Exchange-Traded Fund (ETF) called iShares Barclay's 20+ Year Treasury Bond Fund (symbol is TLT) and the price of that Fund closed the day more than 3% higher than it closed on Friday, just hours before the S&P announcement.
Well, this is just one day's action in the financial markets, and one day does not make for a trend.
People who are smarter and more knowledgeable than I am on the subject of financial analysis will debate the pros and cons of the S&P announcement, as well as the fact that the other two major credit rating agencies left their ratings of US debt at AAA. Likewise, the meaning of the price action in US Treasury securities will probably be debated, as will be the importance of the messages being sent by the pricing actions today in all of the world's financial markets.
I do not much care about what is said in those debates. What I care about is the central issue facing this country of how to generate growth in the economy.
I do not much care about the debate over reducing government deficit spending. (Apparently it will happen.) What I care about is how that debate and those reductions will affect growth in the economy.
I do not much care about positions--or the lack of positions--taken by Mr. Obama and Congressional Democrats (that's my team there) which yield no evaluation of potential changes to social entitlement programs; changes have been suggested by thoughtful people, notably last year's Simpson-Bowles Commission, and they deserve more consideration and analysis than they have received. What I care about is how such changes would affect the growth of the economy; there will be an effect, but there is not yet any public discourse on this subject. Shame on our political leadership! And shame on the media!
I do not much care about self-righteous moral certitude as exhibited by Congressional Republicans and most of the Republican Presidential candidates--including and especially the Not-a-Party "Tea Party" elements of both groups--who maintain that only they can possibly know what's right and good for the rest of us, and so their rallying cry becomes "No Compromise!" (That's definitely not my team.) What I care about is how something that can be proposed by somebody with a different point of view from mine can contribute to growth of the economy.
I do not much care for this notion that "government is the problem," and by inference it is the biggest problem we face. Such a notion ignores American history. The United States has had at least three near-death experiences due to a lack of government: the years immediately following the end of the Revolutionary War and before the adoption of the Constitution; the period from after the election of Abraham Lincoln until his inauguration as President; and the early years of the Great Depression. What I care about is how government can contribute to growth of the economy by being a solution to problems that others are unable or unwilling to address.
I do not much care for the ideas from either side of the political spectrum which could cause business and government to act entirely separately and at arm's length from each other. What I care about is how business and government can coordinate their resources to achieve growth in the economy.
These are themes, not specifics. I am looking for concrete--or, at least, less-amorphous--proposals. All ideas are welcome. There will be much more on this.
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