S&P downgrades Ireland

myp said:

...and here we go again. Standard & Poor's downgraded Ireland to AA- earlier today as the country's debt problems seem to be worsening. Government expenditures, many dealing with their housing crisis, have continued to mount and S&P hiked it's estimate on Ireland's bank recapitalization plan, leading to the lower credit rating as well.

Ireland dismissed the analysis as "flawed."

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Ireland is the small scale version of the US.

The spending and tax reforms in 1986 turned a lagging, lackluster economy burdened with decades of "civil war" into a booming nation with full employment and growth rates pushing 10%. As the economy grew and wages grew, spending grew, including massive spending by the once frugal government. Spending on govt health care and education soared (400% growth), public sector employment grew and associated expenses doubled. Public sector workers salary is about 20% more than their private sector counterpart. Government spending on infrastructure projects went out of control. Ireland also suffered a massive housing and real estate boom and bust, primarily due to unrealisticly low interest rates (caused by the adoption of the euro in 1999, which forced below market lower interest rates on Ireland) . In 2008, it all came tumbling down and now Ireland is one of the "PIIGS" countries everyone is so worried about.

All of this should sound familar, change the names it mirrors the US since the 1980's. Due to our larger size and the US$ being the unofficial world reserve currency, we are not in as a precarious a position as little Ireland.

But also because of our size and political situation, we can't change course easily. It might already be too late.

dave said:

But also because of our size and political situation, we can't change course easily. It might already be too late.

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Not with the current adminstration and congress for sure

They have plowed their efforts into the same Keynsian bs that Japan tried for ten years. It didn't work and their national debt is nearly 200% of GDP. Further, they have tried to reinflate the bubble rather than permit an honest market correction. This makes sense from a politician's POV because that correction will suck in ways that could well make 1983 look like nothin'.

Americans collecting unemployment know they can collect for nearly two years. Many have said they don't plan to look for work until their benefits look to run out. My faith in Americans tells me that this is probably a small cadre but still. When one subsidizes unwanted behavior one gets more of it. There are lots of jobs. Problem is, most are crappy jobs and unemployment pays better.

Our society has made it unnecessary to work in order to survive. Our expectation of luxury has lead us down a very long path that we refuse to give up. We are dancing to the string quartet playing on the deck of the Titanic and we've seen the movie and know how it ends... we just don't want to bother with it.

Reminds me of the train of communism story....

The train of Communism comes to a sudden screeching halt and lays idle on the tracks. The communists leaders quickly gather in the dining car to discuss their options. Trotsky pipes up first, "Comrades, nothing to worry about. The revolutionary workers in the West will come to our assistance." So they wait...but nothing happens. Then Stalin declares, "Right. Have the engineer and the coal shoveler shot. This will set things aright." So they shoot the engineers and the coal shoveler...but nothing happens. Then Khrushchev opines, "Perhaps we should rehabilitate the engineer and the coal shoveler. A liberal attitude like this may work." So they rehabilitate the engineer and the coal shoveler....but nothing happens. Then Brezhnev says, "Close the curtains, pass out vodka and tell them we are moving."

dave said:

Ireland is the small scale version of the US.
The spending and tax reforms in 1986 turned a lagging, lackluster economy burdened with decades of "civil war" into a booming nation with full employment and growth rates pushing 10%. As the economy grew and wages grew, spending grew, including massive spending by the once frugal government. Spending on govt health care and education soared (400% growth), public sector employment grew and associated expenses doubled. Public sector workers salary is about 20% more than their private sector counterpart. Government spending on infrastructure projects went out of control. Ireland also suffered a massive housing and real estate boom and bust, primarily due to unrealisticly low interest rates (caused by the adoption of the euro in 1999, which forced below market lower interest rates on Ireland) . In 2008, it all came tumbling down and now Ireland is one of the "PIIGS" countries everyone is so worried about.
All of this should sound familar, change the names it mirrors the US since the 1980's. Due to our larger size and the US$ being the unofficial world reserve currency, we are not in as a precarious a position as little Ireland.
But also because of our size and political situation, we can't change course easily. It might already be too late.

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Except for the ideological bias, I more or less agree. I might point out that the so called Socialist North in Europe seems to be coming through this crises pretty well.
Still, Western Europe is awash in debt. Most countries there are worse off than the United States in that respect. And that’s truly frightening. The economies are interlocked in Europe, and with North America. It looks to me that we are in grave danger of hitting a tipping point, and then a cascading collapse into hyperinflation.
The US dollar is the reserve currency of the so called capitalist economies since Bretton Woods. Until Johnson and Nixon took the United States off bimetallism, the dollar was secure. Now it’s fiat money and supported by faith.
I suspect that most of the debt is due to the games that can be played with fiat money. In the United States, we have the Federal Reserve and their monopoly money. There is no correlation between interest rates and demand for money. In addition, gold and silver are climbing. If this continues, something has to give. That is, unless the financial equivalent of perpetual motion machines actually works.