Standard and Poors’ downgrading the USA’s credit rating seems to me a little like saying, ‘We don’t think oxygen is so good for breathing anymore; suggest you try something else.’
Some day we are going to have to recognise that oxygen is all we’ve got, even if it is a little less magic than some people once suggested.
As far as I can understand it, the banks created a whole lot (well, more than that) of money, as debt, attached to things that weren’t actually worth all that much. As that became apparent, they persuaded others to take the near-worthless things onto their books – greater investment fools (including many of their fellow banks) and, ultimately, governments (ie ordinary people).
So began the great merry-go-round, with the people who think they own the stuff, and who therefore think they are wealthy (let’s call them the bondholders), periodically getting worried that those responsible for paying back the debt to them (at some point) may perhaps be unable to do it. So the debt has to be shuffled off onto someone else, who currently looks a little more bright and shining – a bigger, better bank, a government, an international body. Ah! – that looks better. For a while. But it’s still the same old debt, backed by the same old overvalued asset. So the relief doesn’t last long.
It won’t get better until they realise it’s only air.
Meanwhile the trick may be to ensure that the fetid parcel is in the hands of common people when the music stops, but the fly in the ointment is that common people, even if they are to be economically wiped out, do not have the resources to support the currently inflated aspirations to wealth of the privileged classes. It is going to be dog eat dog, and no quarter given.