What do Cisco and Standard and Poors have in common?
They are both headed by individuals named John Chambers. Given the recent news surrounding each of those entities, the reason you don’t see their respective CEO’s both appearing in the same picture is not because they are the same person, but because the world would implode if all of the evil intent directed toward them were to converge into such a tiny space.
Four months ago I wrote a blog essay entitled “S&P’s Mea Culpa“. On that day the occasion was S&P’s threatening word’s regarding the health of the United States’ financial system. Those words resulted in quite a market sell-off, but with a significant bounceback by the closing bell.
Alright, in the name of fairness, let’s just say the words were “cautionary”, rather than “threatening”. People, however, tend not to panic in the face of caution, whereas threats are more likely to evoke an adrenaline fueled response.
No one throws threats to the wind.
On that day, we actually had the last laugh.
At the time, S&P warned that a debt downgrade would be forthcoming in a couple of years if there was not a substantive alteration in our national ability to manage our debt and obligations. A “credible deficit plan” is what they called for and they seemed to suggest that our elected officials might not be up to the task.
In response the spin being put on the S&P pronouncement was that they were just gently urging the political process to move forward in a meaningful and constructive way.
Jay Carney, the then new Presidential Press Secretary replied to the spin by stating that the political process would “surprise S&P”.
Like most of my blogs, that one was written after the facts were in and was a blend of (attempted) humor, cynicism and faulty analysis. Today’s blog is different, in that it is written in worried anticipation of what tomorrow will bring, as our markets open. I don’t see very much in a humorous vein at the moment.
So do me a favor, read or re-read “S&P’s Mea Culpa“. Besides a laugh or two, it was a prescient piece (That sound you hear is a self-inflicted tap on the back”.
I won’t even join the bandwagon and lambaste S&P for their $2 trillion error, or their role in the banking meltdown of 2008. At this moment, even Friday seems like ancient history. I also won’t join the chorus and suggest that there was a political agenda behind the downgrade and its timing.
Well, slow forward a mere 4 months and the downgrade has become a reality. Time usually seems to go by quickly when you’re having fun, but somehow we missed out on about 20 months of fun from that “couple of years” warning.
And what of that political process? Was S&P ultimately surprised by the way our elected officials responded to the call for financial management? Probably not, but even the most wizened of cynics was stunned by the process. Whoever keeps track of these sort of things can perhaps make a statement regarding the public’s impression of their elected Congress compared to other periods of discord.
For my perspective, recent events highlight the fact that it only takes one to decide not to tango.
I suppose that you could file this thought in the “Irony Department”, but I doubt that it’s very funny to those sweating it before Monday’s market opens. But to the Republican leaders, what will prove to be more costly to the demographic that they sought to protect during the debt celing “compromise”? The additional taxes they might have been required to pay or the wealth destruction from the recent market plunge and anything that may lie ahead? No doubt, that on a per capita basis, the wealthy will be disproportionately effected by a stock market debacle.
I’ve lived through the tumult and in-fighting during the Vietnam War era, by by the same token, saw the bipartisan disgust during the Watergate years.
Fascinatingly, but then again perhaps not, if you read “How Did We Connect Before Kevin Bacon?“, August 8th the first day of trading subsequent to our S&P downgrade is also the anniversary of President Nixon’s resignation speech. As an aside, the market closed down nearly 1% following that news.
Wouldn’t a simple 1% drop on Monday seem liike an incredible gift?
I’ve seen the “Crisis of Confidence” coined by Carter that inspired no one, as well as the national unity during the Iran Hostage crisis. Had you purchased yellow ribbon futures then, you’d be having brunch with Carlos Slim right now.
I’ve seen us stand together when the threat of Y2K had even the most brave of us digging survival bunkers.
And of course, 9/11 was barely a decade ago and we even witnessed the most unlikely of all sights; our elected officials standing in unison on the Capitol steps, singing from a sense of shared national pride.
Borrowing from one of my 1970’s favorites, ELO, “But I never seen nothing like you” could very easily been written in anticipation of the United States House of Representatives’ response to the challenge S&P presented to them in April.
I don’t want to bury the lead, so here it is: They failed the challenge.
Remember that annoying British import game show, “The Weakest Link”?
If you’re ever looking for a political analogy to a terrorist, think “Tea Party”.
I was pleased to see that @TeaPartyorg stopped following me on Twitter on Saturday. As that happened, I could see legions of Angels in the making receiving their wings.
Imagine Michelle Bachmann, who just a few days ago pulled a George W. Bush and urged default on, now is taking the opportunity to demand President Obama’s immediate dismissal of Timothy Geithner as Treasury Secretary. Using her misplaced sense of logic, she should be lauding him, despite the fact that he has been a steady shepherd.
Truth be told, deep down I believe that if Geithner had sported an Angelo Mozilo like tan, maybe S&P would have given him a free pass.
Although it is certainly true that the downgrade, whether deserved or not, occured during President Obama’s tenure, the last time I looked, we are still a nation of three equal governmental branches.
Just this one time, I’ll give a free pass to the Judicial branch, as well.
I’m not an economist, but I don’t think it is beyond reason to believe that decreased government spending will result in greater unemployment than increased taxes on the top 1% will diminish trickle down benefits to the economy.
The fact that there is no shred of evidence of compromise in the debt ceiling agreement, specifically as it relates to increased revenues is clearly the reason S&P took their action in a much accelerated time frame.
Every business knows that cutting expenses can take you only so far. At some point cutting expenses accelerates destruction. There’s a difference between cutting “until it hurts” and “cutting to the bone”. Ultimately, the only way out of the abyss is increased revenues.
Unfortunately, there are those that continue to cling to the unproven axiom that decreased taxes on the most wealthy is stimulative to the economy and they refuse to use a rationale thought process to consider alternatives to an all or none approach to the economy.
I do understand that approach to a hot button issue such as abortion. It’s not terribly easy to compromise on that kind of issue, especially if there are religious overtones.
The last I looked, there were no such Biblical prohibitions on altering tax tables during times of economic need.
And man, for the United States, this is a time of need of Biblical proportion.
Since we are really in uncharted territory, no one has even the slightest idea of what Monday morning will bring.
Of course we’ll all look to the Asian markets as they open Sunday evening but we alone are in charge of our destiny.
Just as the nation responded to the horrific human tragedy that was September 11, 2001, so too must we now resolve to correct the mismanagement of our political system.
In fact, I don’t believe that there is anything inherently wrong with our economy that political compromise could not correct. It is time to send a clear message to all of those that have been entrusted to steer the national ship to forget about party alliances, blind faith and the need to campaign on a 24/7 basis. Ultimately, political dogma from either side, is the antithesis of our democratic foundations and principles.
There was once a very frightening expression “Deutschland uber alles” that belied an inflexible approach to existence, where the only alternative to complete victory was death. Germany above all was the siren call that led a generation to attempt to vanquish their perceived enemies.
Sound familiar? How else do terrorist organizations function? Only recognizing the extremes and going to any length to ensure that their misguided beliefs come to fruition.
Politics above all? Tea Party above all? Politics above nation?
It’s time for a national call to action to take back the debt and restore core principles to our daily lives.