Aided by the Standard & Poor's credit-rating arm of their party, the Republicans' Tea Party Downgrade broke through America's financial defenses, and plunged the nation, and the world, toward a Tea Party Recession.
"Everyone's looking and seeing a strong possibility of a global recession now," Princeton economist and Nobel laureate Paul Krugman told the PBS News Hour Monday.
It was not immediately known how many GOP moguls were making a killing short-selling the plummeting global bourses. More than $4 trillion had vanished since markets peaked July 21, even before Monday's 600-point Dow Jones downer. Much of that cash doubtless went into the well-hidden numbered accounts of well-connected tycoons.
A new CNN poll revealed 75% of those surveyed were conscious enough to realise things from sea to shining sea were going either "pretty badly" or "very badly."
60% of Americans figured the economy would get worse before it got better, probably because 48% of Americans had drunk the supply-side Kool-Aid and believed the recent economy-killing $2.8 trillion all-cuts deficit-reduction bomb Tea Party zealots forced onto President Barack Obama, Democrats, the nation and the world actually hadn't cut spending enough.
Which, of course, is what the GOP's credit rating agency S&P claimed Friday, downgrading the nation's AAA credit rating to AA+, then Monday slapping Fannie Mae and Freddie Mac to boot. The Tea Party Downgrade triggered another market slide Monday, as the Dow Jones Industrial Average plunged another 634.76 points, or 5.55%. The NASDAQ was down 174.72 points, or 6.9%.
Krugman described the synergy of GOP budget-cutting mania and S&P credit-rating slashing as "bad ideas being reinforced by bad agencies."
Despite the downgrade, investors were dumping equities and stampeding pell-mell into supposedly non-AAA US Treasuries. Yields on the benchmark 10-year note fell 20 basis points to 2.35%, the lowest level in two years, confirming that anyone and everyone was eager to buy up as much of the S&P-shunned US debt as they could get their hands on. If you have crummy credit, you're supposed to have to pay higher interest, but US Treasuries were paying lower and lower interest every day.
"I believe this is without question a Tea Party downgrade," Sen. John Kerry (D-MA) told NBC's Meet the Press Sunday. "This is a Tea Party Downgrade, because a minority of people in the House of Representatives countered even the will of many Republicans in the United States Senate who were prepared to do a bigger deal."
President Obama and Democrats had sought a "balanced" approach to deficit reduction which included closing some tax loopholes and ending a few tax subsidies.
Not that anyone should have been messing with deficit reduction or considering spending cuts in the middle of a dicey economy, when governments, acting as the consumer of last resort, should have been stimulating the economy with more spending, rather than depressing the economy with huge spending cuts.
"We actually need stimulus now," said JP Morgan Chase's Terry Belton on the News Hour Monday.
Financial markets around the world were taking a beating, and as ordinary Americans watched their retirement savings vanish, short-selling opportunists were doubtless raking it in.
S&P Monday pontificated, "the August 5, 2011 lowering of the United States of America sovereign credit rating to AA+ from AAA does not have an immediate or direct impact on our ratings on US banks."
Swing-and-a-miss, strike two, on another belt-high fastball right over the middle of the plate. While investors were scrambling to buy the US sovereign debt S&P said was garbage, investors were scrambling to dump the stocks of big banks S&P touted.
Bank of America stock was down 20.32% to $6.51 a share. Citigoup was down 16.42% to $27.95. Wells Fargo was down 9.04% to $22.93. Rounding out the Big Four, JP Morgan Chase was down 9.41% to $34.06.
S&P was heretofore best known for taking any pile of bundled sub-prime mortgages and rating them AAA during the 2000s real estate bubble. It was not immediately known how long S&P had been planing their anti-American rating perfidy, although a sudden spate of modest post-2008-crash contributions from S&P execs to some Democratic politicians, cultivating the appearance of impartiality, appeared suggestive.
S&P's own parent company's stock tumbled 8.6% Monday. McGraw-Hill dropped $3.62, closing at $36.87.
Global markets continued to implode as it began to dawn on investor after investor that built-in spending caps Republicans extracted from the Obama Administration would preclude any possibility of US government stimulus spending.
While corporations had plenty of money to hire more workers and invest in new equipment, the dearth of consumer demand had discouraged business expansion. Now, Republicans extended that demand gap by proscribing the US government from fixing any of the $2 trillion worth of infrastructure in need of repair, or investing in any of the billions of dollars worth of research opportunities promising the new technologies of the future.
Doubtless, Republicans were heavily leveraged on China developing those new technologies. China, for their part, chimed in through their state-run Xinhua News Agency, "China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets." China was even more leveraged on China developing those new technologies, and wanted to be sure American industry wouldn't be innovating any time soon.
With no demand to expand business, corporate plutocrats were doubtless happy to simply pocket the money sitting on their ledgers. Crash the market, short-sell the stock, pocket the difference. It beats working for a living.
And, Republicans were already clamoring for even more cuts from the bipartisan, bicameral commission that's supposed to figure out the second half of the $2.8 trillion in cuts they'd won. Tea Party zealots were feverishly dreaming of $4 trillion in all-cuts deficit reduction. Tea Party zealots wanted to make sure any economy they crashed, stayed crashed.
The ultimate Tea Party goal, of course, was to eliminate Medicare and hand all its money to their insurance industry cronies while leaving seniors with worthless discount coupons, then to dismantle Social Security and hand all its money to their Wall Street cronies while leaving all but a handful of Americans penniless in their retirement years.
With consumers tapped out and government purse-strings held hostage by Tea Party terrorists, the economy was doomed to a death spiral. Wall Street money moguls, wallowing in their mountains of cash, appeared unaware they were gutting the financial system that supported them. But, investors seemed to understand the line score, as they dumped everything in sight and dove into the safe haven of the US Treasury notes S&P disdained.
After all, even though gold shot up $56 to $1719 an ounce, Treasury notes were so much more convenient to deal with than a yellow metal that was bulky, heavy, and required a fortress and a small army of machinegun-toting sentries to guard it.