SP debt downgrade = Sat morning rant

Looks like the news is an ugly potion across the Internet, so I'll take my turn with the ugly stick. I rarely go political on this blog, so I'll temper my comments, but geez Louise, reading some of it, is enough to boil blood.

I see the downgrade as bringing a true U.S. austerity budget closer. The Greeks had time to make rational conscious choices, now the markets are forcing changes upon them. (Link1 is to grim article in the UK Guardian about Greece). Keep in mind that these massive cuts in spending were passed by far left Socialists in Greece, so coming soon to a budget near you:
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salaries of civil servants are slashed by up to 30% within a few months, as happened last year, and over 20% of public-sector workers face unemployment within the next four years – plus whole swathes of national assets are to be privatised before Christmas, with more job losses doubtless to follow ...
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Meanwhile in the U.S. there is nary a mention of cutting massive Federal salaries. Link2 is a USA Today article about the growing pay gap.
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Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation ...

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There was no mention of across-the-board salary cuts during recent budget negotiations. Why can't even a modest 3% rollback in Federal salaries and benefits be proposed even? Why? Because Congressional staffers are all Federal employees? Probably. So sad.

Link3 is a news bit about Socialist Italy pledging to balance its budget.
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Italy pledged on Friday [8/5/2011] to work swiftly for a constitutional amendment requiring the government to balance its budget ... with the possibility of reaching a balanced budget by 2013 ...
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If Socialist Italy can get there, with massive cuts in government spending, why is there no political will in the U.S. to move that way? Not enough pain? Too many pigs feeding at the Federal trough. Too many droids in the media spinning their narratives? All the above.

Link4 is a scary report from TaxProf citing IRS sources about U.S. incomes. These are compiled using stats from tax returns, and show a 15% decline in reported income.
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U.S. incomes plummeted again in 2009, with total income down 15.2% in real terms since 2007, new tax data showed on Wednesday. The data showed an alarming drop in the number of taxpayers reporting any earnings from a job -- down by nearly 4.2 million from 2007 -- meaning every 33rd household that had work in 2007 had no work in 2009.
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The pay gap cited in the USA Today article in link2 is worse than reported. Private sector workers have seen a 15% drop in average real wage income. Most of the drop is because of fewer private sector workers, and many more that were forced into lower paying jobs. Yet, there is not even a proposal for modest cuts in Federal compensation, which now averages over $123k per employee. Average. Are you kidding me?

There was one more article that I wanted to link, but I can't find it. The gist of the article was about the PE ratio for U.S. stocks, and how it is in line with historical averages. However, the ratio of average U.S. wages vs. stock prices, is near historic lows. The theory is is that something has to give. Consumers get their money from wages. If private sector wages are careening lower as the TaxProf article indicates, earnings will eventually follow because consumers have no money to spend.

As for market reactions, I always come back to the bond market. It is the biggest market and often drives the bus. Unfortunately all the QE (quantitative easing) programs have distorted the bond market the most. Even though QE2 is over, the threat of QE3 still keeps yields artificially low, with the U.S. ten year bond well below 3%. I see it going back to a historic average of 7% at some point, but when the Fed is burning trillions to keep yields low, the time table is uncertain.

Enough of my rants. I'll pass the ugly stick back over to the many political threads and forums all over the Internet. It is ugly out there. Keep your cool. Again, rule #1 is that no one wins an argument on the Internet. Arguing about politics [or religion] with someone with different assumptions and a different world view is a big waste of time. It can ruin friendships, and creates ill-will. People can't agree on basic assumptions, so their arguments spiral out in circles from there. No one ever agrees after a heated political thread, not that I have seen. Mostly they serve to bring out the ugly in people.