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In Defense of Liberty - Daily News - 6/06/2011

Written By: The Liberty Brothers, Mr. John C. Deming  |  Posted: Monday, June 6th, 2011

Washington Post - "Moodys: If debt deal fails, U.S. risks credit downgrade". In one of the most telling signs of economic incompetence recently, Moodys actually suggested that the U.S. credit rating will be downgraded if we do not increase our debt ceiling. It is difficult to imagine a credit rating agency actually encouraging a borrower to increase his or her debt limit without increasing income, especially when the debtor is already borrowing money at an alarming pace. No doubt lawmakers in Washington will use this as a scare tactic to support raising the debt ceiling. A more important question should be asked, however. Why do we have a debt ceiling? If it is true that it will be a economic catastrophe if the debt ceiling isn't raised, then it seems there shouldn't be a ceiling. We should just be able to borrow as much as we want to pay for both our foreign and domestic interventions. Would Moodys agree with a $100-trillion ceiling? The suggestions by Moodys, and lawmakers who espouse these principles, are absurd. Increasing your debt-to-income ratio doesn't make you more likely to pay your debts, it makes you less likely to do so. However, this article points out the problem with international credit ratings of governments. The U.S. is not likely to be able to pay all of its current and future obligations in social security, medicare, and medicaid. We are also unable to pay back our foreign creditors with dollars that have not been devalued by inflating the money supply. Moodys seems to be suggesting that we devalue our currency in order to pay back our obligations. But isn't that a default? When our social security payments to seniors are worth half as much as they should be due to dollar devaluation, isn't that a default? Moodys seems to think these types of defaults are acceptable. In reality, the U.S. must not raise the debt ceiling, and must cut back on spending and taxes to reduce its debt-to-income ratio. The Moodys rating system is fundamentally flawed, and we should use common sense instead.

 

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