Need any further proof that we live in an era of prevailing financial farce? Standard & Poor, the rating agency that helped cause the collapse of the global financial system three years ago by awarding bundles of junk mortgages AAA ratings, has now downgraded the AAA rating of the country that deregulated the financial system to the point where bundles of junk mortgages received AAA ratings.

Confused? So, apparently, is the rest of the world. The markets are all in a flutter, and US politicians, pundits and backwoods militia groups are calling foul, lamenting the loss of American economic prestige. The treasury is enraged, claiming S&P factored into its calculations a bunch of armchair political analysis claiming Washington has become dysfunctional. Also, S&P seems to have blundered debt projections by about $2 trillion plus change. Never mind the details: In short, the disaster that has been continually unfolding since 2007 is back on track after we were lulled into confidence by a relatively happy 2010. The end of the world, briefly on pause, is once again ticking along nicely, thank you.

The collapse of a pyramid will always, from afar, resemble a Marx Brothers movie. There will be slapstick, there will be cake thrown in faces, there will be circular wordplay. (“Who’s on first,” repurposed as, “Who is AAA? France is AAA? Who is +AA? Syria’s +AA?” And so on.) What we are witnessing is the idiocy of the response to the collapse of the financial system finally playing itself out in real time. While the US poured billions into the economy, saving companies it claimed it could not afford to allow to fail, it didn’t pour in enough, nor did it pour it into the right holes.

It’s almost as if the current crisis—this threat of a double-dip recession—was designed by policymakers. It’s a result of two entirely opposed ideological points of view, neither of which takes into account basic math, the laws of physics, or that 100 cents make up a dollar. Special interest groups have ensured that taxes for those who can afford to pay them remain historically low, and that entitlement programmes the government cannot afford to finance continue to be defibrillated. Back and forth they go, and the chimps at S&P, when not throwing their own faecal matter at one another, get confused. And thus issue a downgrade.

Unsurprisingly, we now find ourselves in the sequel to the financial crisis. Sequels tend to be louder, crasser, longer and more boring than their progenitors. They also gross less at the box office. So it shall be with this one. Paul Krugman and Michael Lewis can expect lots of work, Goldman Sachs will bank another trillion, the rest of us will read Cormac McCarthy’s “The Road” for survival tips. Because humans are addicted to analogies, we are told to look to Japan for an example of the hell we are about to experience. The horror.

What are we to be wary of? “Balance sheet recessions” is the new horror movie buzz term. This concept was floated by Japanese economist Richard Koo, who was describing the difference between the correction born of a regular recession—overheated supply exceeds demand, therefore the economy slows down—as compared to the debacle Japan suffered at the end of the 1980s. In the latter case, the Japanese economy was hamstrung by massive debt that was too high a portion of its GDP—and an entirely dysfunctional political establishment had to figure out how to pay it. Which they couldn’t, and didn’t. The slowdown has lasted for more than 10 years. It hasn’t been pretty.

But if Japan is the model—the shining paragon of financial dissolution—how bad is Japan, really? Do marauding gangs tear through the streets, as they do in London? Is human flesh a standard menu item? The apocalyptic is hardwired into Japan’s collective subconscious, and rightly so, considering it is an island nation perched on a seismic fault line. The country is hardly the picture of tectonic stability, as witnessed by the tsunami that recently swept through it, almost jumpstarting nuclear holocaust. But has Japan collapsed? Has it been ruined by a decade of zero growth? It has not. But it has calcified, which could be considered death by boredom, rather than by cataclysm.

Japan’s failure was a result of crap policy. Financial Crisis I was a result of worse policy. Financial Crisis II is a mixture of the two. We now stand at a threshold of a second financial meltdown that the gatekeepers at S&P have handily announced by issuing their ratings bitch slap. Where the whole sorry mess morphs from high comedy into abject silliness is in the rebukes issued to the Americans by the Chinese and the Indians, who are starting to believe that they are economic powerhouses. The Chinese pyramid (set to collapse catastrophically in T-minus five years—and by all means, go ahead and set your watch to this) is in no small part ballasted by US debt, in the form of Treasury Bonds which they’ve been buying like so many hot pork buns. And the circle of life closes.

All this being said, no one really knows what the S&P downgrade will lead to. Higher borrowing costs for states, and therefore schools and clinics and other necessary social institutions? The beginning of a long, slow slide to a double-digit DOW Jones index? A knock-on effect and a rise in borrowing costs in the collapsing eurozone?  Certainly, the so-called “Supercommittee” of debt cutters tasked with slashing US spending will be reinvigorated anew, and will start adding to the subtractions from the recent garbage “debt-ceiling” bill signed into law at the eleventh hour. Can you smell the panic? Is this it—the middle of the beginning of the end?

Could be. Thing is, given how everybody has had everything wrong over the course of the last five years, we here at Daily Maverick are giving punditry a downgrade. No longer will prognosticators receive a AAA rating simply for spewing nonsense in major publications. A +AA rating on them all. We advise stocking up on canned products, buying shares in bottled wate, and a healthy belief in the healing prowess of “bittere gelegte”. This is “bitter laughter,” the old Yiddish means of making it through a day in the ghetto. And if you get a chance, throw a cake in someone’s face. It helps. DM

Read more:

• “S&P Downgrades US Credit Rating for the First Time” in The Washington Post;
• “S&P Downgrade Is Seen as Adding Urgency to Debt-Cutting Panel” in The New York Times.

Photo: The Standard and Poor’s building is seen in New York, August 8, 2011. Stocks tumbled on Monday, the first session after rating agency Standard & Poor’s cut the top-tier AAA credit rating of the United States, further unnerving already-skittish investors. REUTERS/Brendan McDermid.