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It should be easier now for advocates of limited government to keep the focus on restoring economic growth.
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As noted in a June 22 analysis by the Financial Times , “With the eurozone engulfed in a debt crisis and emerging market economies, such as China, years away from becoming legitimate global financial entities, investors insist there is really no alternative to the U.S. at the present time.” As Jim Paulsen, chief investment strategist at Wells Capital Management, told the paper, “A downgrade for the U.S. would mean the new triple A is double A.”
But even if there were slightly higher interest rates and slightly less demand for U.S. bonds as a result of the downgrade, would that really be so bad? After all, this would mean fewer inflationary pressures and higher costs for the government to borrow money to create new bureaucracies.
A more honest evaluation of the risks of government securities also means a more even playing field for entrepreneurs to raise capital. The AAA rating for U.S. and other government securities has given sovereign debt an advantage over private debt. Given the profligate behavior of many of the world’s governments, this advantage was often undeserved. If the AAA were gone for the U.S. and European countries, “investors seeking a fixed and totally safe return would no longer look towards governments, but to the most stable and profitable private companies,” argues financial analyst Martin Hutchinson at PrudentBear.com
In the meantime, the U.S. should slash spending, taxes, and regulation. Not for the purpose of restoring S&P’s AAA rating, but to restore the quadruple-A capitalist system that allowed investors and entrepreneurs to propel America to economic greatness.
Prediction: Defying all conventional “wisdom,” the U.S. stock market will be up for the day on Monday. Maybe by 10 points, or maybe 100, but it will end the day in positive territory.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online