Bombs Bursting In Air
Ratings agency downgrades US Government credit, cites "expected fiscal deterioration"...
Bill Bonner, reckoning today from Bregenz, Austria...
We got here just in time for the fireworks.
Bregenz is just across the river from Switzerland…and only a stone’s throw from Liechtenstein and Germany too. And on Tuesday night, we crossed the river to visit friends in Switzerland.
They live in a castle, perched on a hill overlooking the entire valley down to Lake Constance. At the bottom, down in what is now a wine cellar, is a pediment that was put up in the 10th century. Above it rose the castle – reworked after mischief, fires, and many years of neglect had done their damage. And upon the castle was a circular tower. It was from this vantage point, after dinner, that we waited for the colorful explosions.
As it happened, we expected fireworks on Wall Street too. The rating agency, Fitch, had just downgraded US debt. CNBC:
Nasdaq drops more than 2% in worst day since February as Fitch downgrade ignites selloff
Fitch Ratings cut the long-term foreign currency issuer default rating for the U.S. to AA+ from AAA Tuesday night, citing “expected fiscal deterioration over the next three years.”
The last time the U.S. got a downgrade from a major ratings agency was in 2011 when Standard & Poor’s cut the rating to AA+ from AAA.
Bombs Bursting In Air
As expected, US bonds went down. Yields went up. Bloomberg:
Treasury Yields Hit 2023 Highs
US 10-year yield climbs as much as 10 basis points to 4.12%
Increasing the cost of loans – in a country with $32.6 trillion in debt already…that needs to borrow $1 trillion per month (in this quarter) – is bound to have consequences. It is those ‘consequences’ that we are waiting for.
In the meantime, Tuesday was the Swiss national holiday, commemorating an event that happened a long time ago. In 1291, three cantons – Uri, Schwyz, and Unterwalden – got together, forming the nucleus of what grew into the Swiss Confederacy. Remarkably, the cantons have been able to hold onto their rights and power. Even today, few people know or care who the president of Switzerland is. It doesn’t matter, because the real power is at the local, cantonal level.
As soon as it began to get dark, the fireworks began. Clusters of white sparkles…great, booming bombs…dazzling displays of shooting red stars and bursting incendiaries – everyone seemed eager to blow up something.
“I’m disappointed,” said our host. “It’s usually more dramatic. People compete with their neighbors to put on the biggest show. I guess the Swiss are just feeling more subdued.”
From Whip to Wage
The US also began as a confederacy of independent states, much like the Swiss cantons. But American states lost their independence to their central government in a series of power grabs by Washington. Today, Americans can scarcely recall or imagine that it could be any different. In the recent Supreme Court decision on abortion, for example, most people were surprised when the court decided that reproductive rights were up to the states, not the federal government.
The biggest power grab by the feds came in the mid-19th century. Lincoln sent the US Army to bring the states of the southern confederacy into line. Since then, no state has seriously challenged Washington’s power.
But there was more to that story. Back then, slavery was being made obsolete by the Industrial Revolution; it was just cheaper to drive people with slave wages than to drive them with whips. The whole world was turning against slavery. But not at the same rate. In the Deep South of the USA, on the big plantations, slavery (apparently) still paid. In the North it did not. Was it so surprising that northerners led the opposition to it? They could enjoy the piety of opposing slavery, without the cost of giving something up.
Into the Mud
Ultimately, it was fossil fuel that put slavery out of business in the 1800s…not the high-minded intentions of yankee abolitionists. The Industrial Revolution made it possible for machines to do far more work than a human slave. After thousands of years, keeping people in bondage became bad business…and then, just bad.
Now, the Industrial Revolution has run its course. And today, the abolitionists have coal, oil and gas in their sights. They think they can make the world a better place by trampling down the internal combustion engine and gas-fired power plant.
But wait; they owe their wealth to coal, oil, and gas…don’t they? How could they turn against them?
Oh dear reader...we have to sink into the mega political mud a bit further, don’t we?
Stay tuned…
Regards,
Bill Bonner
Mr Bonner knows financial data and has a good understanding of such. However he is been taught/indoctrinated by the Public Fool System when it comes to History. The first and REAL major shift to centralize power in the Federal Government came with our Constitution. The delegates to the Constitution were only authorized to make amendments to the Articles of Confederation, not write a NEW constitution. Within the Articles of Confederation was the stipulation that agreement had to be 100% not a majority. Power was at the State level, not the Federal!!
Both Lincoln and Davis stated the Civil War (more appropriately named the War of Northern Aggression) was not fought over slavery!! I can provide direct quotes from both if you would like. The South seceded over Money. The South was providing most of the tax dollars while the tax dollars were being spent in the North. Read the editorials of the Northern Newspapers right after the South Seceded. They were all stating the North would go broke without the revenue from the South. Pay attention to the adage – “Follow the Money”.
Most people have never heard of the Hazzard Circular -
https://books.google.com/books/about/The_Hazzard_Circular.html?id=ygN9twAACAAJ “Slavery is likely to be abolished by the war power, and chattel slavery destroyed. This I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborer, while the European plan, led on by England, is capital control of labor by controlling wages. THIS CAN BE DONE BY CONTROLLING THE MONEY.”– Hazard Circular, 1862. Again this is not taught in the Public Fool System. Remember the 10th plank of the Communist Manifesto is “Free Education for All Children in Public Schools”.
As a side note the 2nd plank of the Communist Manifesto is A Heavy Progressive or Graduated Income Tax. There is a US Govt Dept for every plank of the Communist Manifesto but NOT one for any of the 10 items of the Bill of Rights. Amazing.
Mike Clifford
Bill, I have been following your comments and writings for years and have always appreciated your wry wit and common sense. However, pushing the mistaken causes that lead to the war between the states is flat out wrong. It is true that the issue of slavery was USED to justify the war, it was not the actual cause. The war was about money, as most wars are. The industrialized north wanted to exercise economic hegemony over the continent. Problem was, the south largely accessed finished and industrial goods from France and Great Britain. The mass migration on the continent at the time tended to be from the NE fanning out west and south west. Hence that is where the railroads were being built. It was cheaper for the south to bring goods in by ship than it was to ship goods overland north to south. The north wanted the markets and was willing to fight for them. Amongst the doughy Confederate army, only a chemical trace of them ever owned, or ever would own, slaves.