Full Faith and Credit--A Bygone Era?

Journey
Fabrice De Villeneuve

My father tends to be a "this-is-the-end-of-the-worlder" type of person. I do try to not engage in such proclivities, as I believe that being overly pessimistic nearly always dampens the search for effective and creative solutions.

I've discontinued my Economist subscription. At some point in time when you have a buildup of unread magazines, you have so stem the pileup. I'm sure that I'll subscribe again. I can rely on my father to provide me with periodic e-mails that point out the most dire 'stuff'. Much of it I do not read--it's the same groups espousing the same stuff. But I find the Economist pretty balanced. They do not appear to be in the white-eyed, hair on fire brigades.

The FNM and FRE episode this week is one of grave concern to all of us. I thought that this article from the Economist gave a pretty good summary of what is at stake. I had remarked in another space earlier in the week the amount of investment 'stuff' on their balance sheets, and see that it is addressed here. I think it worth you time to read.

The article (click on below to access)

Fannie Mae and Freddie Mac

End of illusions

Jul 17th 2008

From The Economist print edition

ends with this ominous sentence--and it is something that has been noodling about in the darker corners of my mind:

Perhaps it is no surprise that traders in the credit-default swaps market have recently made bets on the unthinkable: that America may default on its debt.

I wonder if we are to be the equivalent of the Latin America debt of yonder times? I'm dismayed that we've somehow taken "the full faith and credit of the United States" and reduced it a statement at which the world is likely to snicker--or worse--against which to rail.