–Funniest headline of the month: France’s AAA Credit Rating At Risk, Moody’s Warns

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

This surely is the funniest headline of the month, perhaps even since the beginning of the recession.

France’s AAA Credit Rating At Risk, Moody’s Warns
From Before Its News, Tue Oct 18 2011

France is at risk of losing its coveted AAA credit rating, according to Moody’s Investors Service.

The rating agency published a report noting that it may issue a negative outlook on the French sovereign debt rating in the next three months if the costs of providing financial assistance to other euro zone nations and/or banks places France’s budget in a precarious position. A negative outlook would indicate that France’s credit rating is at risk of a downgrade in the coming years.

In a statement, Moody’s warned that “The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government’s Aaa debt rating.”

Think about it. France, which is monetarily non-sovereign, and so cannot control its money supply and is in real danger of not being able to pay its bills, has an AAA rating from all three major rating agencies — though the agencies are waiting for “further contingent liabilities to emerge.”

But the United States, which is Monetarily Sovereign, and so has the unlimited ability to pay any bills of any size at any time, and even has the ability to pay off all its “debt” tomorrow, saw its rating reduced to AA+ by S&P. Is that a howler, or what?

But wait, it gets even funnier:

Moody’s also noted that France’s debt metrics are now among the worst of its Aaa peers, although they are still supported by favorable “debt affordability,” or a relatively low interest burden when compared to the level of government revenues.

“Favorable debt affordability”? “Among the worst of its peers”? I suppose their debt is affordable, IF they get bailed out by Germany and/or the EU. Otherwise, France will go down the drain. Meanwhile, the AA+ United States needs no bail out, nor ever will. That is the benefit of Monetary Sovereignty, where all America’s so-called “debts” are denominated in our sovereign currency, which we have the unlimited ability to create.

By contrast, France has no sovereign currency. It’s on a euro standard, and when it runs short of euros, it’s out of luck.

But wait, it gets even funnier, yet:

The warning by Moody’s stands in stark contrast to Standard & Poor’s and Fitch – the world’s other two major ratings agencies – which each reaffirmed France’s’ AAA rating in August and have not since published any additional reports.

These agencies continue to demonstrate to the world their abject ignorance of Monetary Sovereignty. And people actually pay attention to these boobs and believe their ratings. Amazing.

And funny.

And frightening.

I award five dunce caps to the three ratings agencies, not because they are more ignorant than many other groups, but because they have set themselves on a high plateau, from which they clearly have fallen into disgrace.

(Having no dunce cap tax, my dunce cap deficit has reached 44. The media, the old-line economists and the politicians tell me this is “unsustainable” and a “ticking time bomb.” Taking a cue from Congress, I shall appoint a “super committee” to get this political hot potato off my hands.)

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings


8 thoughts on “–Funniest headline of the month: France’s AAA Credit Rating At Risk, Moody’s Warns

  1. Rodger,

    If you do not immediately impose a dunce cap tax you will cause rapid dunce cap inflation, and consequently their value. Ergo, any prior recipients of two or less dunce caps will render them…, um, intelligent?


  2. Oh, Rodger, can I be on that super committee? I would love to help you design a budget to “balance your books”. Maybe if the recipients are required to pay a dunce cap tax they will become, as Vincent implies, intelligent.


  3. John & Vincent, the whole thing is so silly and so obvious, it continues to amaze me that people don’t get it.

    By the way, one of my areas of disagreement with MMT is the use of the word, “Theory.” It isn’t a theory at all; it simply is a recitation of facts — description of what happens. No theory involved. They should call it MMF — Modern Monetary Facts.

    That’s why I call it Monetary Sovereignty — but then, people don’t understand that, either.

    Rodger Malcolm Mitchell


    1. I’m using Modern Monetary Economics as it is a necessary basis for understanding macroeconomics in the current environment.

      And Tyler has quite the “Dream Team” below.


    2. Maybe that’s the problem: it can’t be that simple to be believable.

      Only when the high priests of economics have their Copernicus moment and start speaking in Greenspan abstractions along with complex mathematical equations can we move forward.

      I will not hold my breath waiting for when learned men admit they were mistaken.


  4. The Economic Team That Would Save America

    Secretary of the Treasury – Rodger Mitchell
    Secretary of Commerce – Warren Mosler
    Attorney General – Bill Black


  5. Steve, excellent article. Right on target.

    The only thing that’s troubling — not with the article, but with the fact: “The ECB wants the dollars so it can lend them out to European banks, which have been having trouble borrowing dollars at affordable rates due to fears about their financial health.”

    The bank’s poor financial health comes from them having lent money to poor risks (You know — those countries that have better credit ratings than the U.S.!) And why are those countries poor risks? Because they gave up the single most valuable asset any nation can have: Their Monetary Sovereignty.

    The EU’s solution: Tell the ECB to lend these poor risks more money, so they can slide deeper into a debt they cannot pay.

    They who do not understand Monetary Sovereignty do not understand economics.

    Rodger Malcolm Mitchell


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