“The full faith and credit of the United States Government.” That’s what backs up our currency—and that’s all that backs up our currency. Throughout most of history, governments had to back their currency with something tangible, typically a fixed quantity of gold. In fact, most coins actually contained the requisite quantity of gold because many of the folks who used those coins in commerce didn’t particularly trust the King whose likeness they bore. It’s good to be king and all, but if you wanted to add a ducat’s worth of wheat to the royal granary, you had to put up an actual gold ducat.

Paper currency required people to place a bit more trust in their governments, though the rule remained—at least in theory—that anyone holding the note could take it to the official treasurer and exchange it for the specified amount of gold. Roughly forty years ago, when Nixon took the U.S. off the gold standard, we dropped every last pretense of convertible dollars. From that day forward, the only thing backing up our currency was two simple words: “trust us.”

Imagine that. Richard Nixon—of all people—stared at the world and said “trust us,” and the world complied. Through seven Presidents of both parties, the world—from multinational corporations to anti-American drug dealers and terrorists—has trusted us to stand behind our currency and our debt. In an uncertain world filled with violent disagreement, the one point on which all could agree was that the U.S. remained uniquely trustworthy.

So when Standard & Poor’s downgraded our credit rating on Friday, the message was both stark and clear: the United States is a little bit less trustworthy than anyone had thought. Why? What happened? Who is to blame? The White House, of course, is quick to point fingers everywhere but the Oval Office. Yet this perceived decline in America’s trustworthiness is eerily familiar to those who have paid attention to the Obama Administration.

In foreign policy, Obama failed to stand behind anti-regime protestors in Iran or pro-democracy moves by the Honduran Congress and Supreme Court; he canceled missile defense systems that we had promised to Poland and the Czech Republic; he abandoned a deeply flawed but longstanding ally in Egypt; and he has taken every opportunity to embarrass Israel. From Colombia to Saudi Arabia, Obama has put our allies on notice: prepare to act unilaterally, because the United States is a bit less trustworthy than you might have thought.

(more…)

Poor Robert Gibbs. In what are his apparently final days in the White House, you’d think he’d like to take some last wistful walks around the place and maybe stop by a going away party or two. Instead, it looks like much of his final time will be explaining why President Obama really thinks we should increase the debt ceiling now, having voted against increasing it in 2006.

Back then, total federal debt was about $8.5 trillion, just over 60% of GDP. Auditioning for the role of a fiscal hawk, then-Senator Obama took to the Senate floor:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

I gotta admit, the man had a point. We certainly did, and do, deserve better. Of course now that he’s in the White House, Obama thinks we absolutely must increase the debt ceiling. One his chief economic advisors recently went public, warning that if we don’t increase our ability to borrow money:

The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008

So let me gets this straight, back when our debt was 60% of GDP Obama thought that an increase in the debt ceiling was a ‘failure of leadership’ and ’shifting the burden of bad choices.’ Now, our debt is over $14 trillion or, more ominously, just about 100% of GDP and Obama thinks that NOT increasing the debt ceiling would be an economic ‘catastrophe’?

(more…)