Epic moments in history are still being made and are being done so in the name of reckless government and major havoc. This past Friday, we saw for the first time in history the U.S. Triple-A credit rating downgraded by S & P. This was absolutely no shock to CrushTheStreet.com, since we’ve been talking about the out of control situation that the government is in for some time now. In all reality, the ratings and the criteria that allowed the S & P to drag on the U.S. credit rating for as long as they did really indicate how incredibly meaningless the credit rating really is. The only justification for the agency to continue to rate the U.S. Triple-A was that America had the ability to borrow, print, and of course the dollar having status of world reserve currency. This essentially proves how absurd and ridiculous the credit rating essentially was in the first place. Already, as a result of this recent announcement, we’ve seen gold climb to a new high of $1,715.40 with major volatility in futures and Asian markets. A wild ride this week can be expected for American stocks.
The debt issue in our nation is absolutely out of control and we’ve seen virtually nothing come from our leaders in Washington. With future spending increase reductions being called cuts, the 2.1 trillion just wasn’t enough to satisfy the issuers of the credit rating which shocked the world. Officials are trying to stress the fact that 2 out of the “big 3” credit rating agencies have maintained their Triple-A rating for the U.S., but CrushTheStreet.com believes downgrades will be soon to follow so long as there are objective decisions being made by the agencies.
David Beers, head of government debt rating unit, stated that, “It’s possible for the U.S. to regain its Triple-A credit rating, but we don’t think it’s coming back anytime soon.” This means even more volatility and uncertainty for the future. The scary part of this whole thing is that we are witnessing the demise of this country step by step. This downgrade in our credit is a result of the monetizing of debt with more debt and artificial stimulus funding black hole spending steering our economy into a major ditch. Although many are starting to understand the illusion that we are living being propped up, we believe that the impacts and effects of the world’s cold shoulder to the dollar and America will be a bitter devastation for many who’ve enjoyed the luxuries of this bubble.
This highest level of credit has made treasuries one of the world’s safest investment for years which has enabled us to borrow at cheap rates and finance wars and social programs that are devouring our nation. Of course as a result, this downgrade could drive up the costs of borrowing and will result as a heavy burden on taxpayers, potentially in the tens of billions. This is not even taking into account the effects of higher interest rates within the borders of this nation which will kill the housing market, drown business growth, and prolong the Great Recession. Like we’ve seen overtime, nothing happens overnight, but we are confident that we will begin to see some major global moves from foreign nations to rid themselves from the dependency of the U.S.
A statement this week from China was a literal finger point and direct order for our leaders to get their act in order and act prudently because the circus they are running with debt accumulation, global expansion, and social welfare is threatening the livelihood of the world. What is ironic is that all these things are supposed to be so beneficial and for the greater good that are destroying the standard of living for millions of individuals living throughout the world. China’s simple request was for the U.S. to “cure its addition for debt and to live within its means.” Wow, what a concept! China is the largest foreign creditor to the U.S. and is in a position to demand some structural reform and to protect its dollar assets. China has 1.2 trillion in dollar treasuries and an estimated 2/3 of their 3.2 trillion in foreign exchange reserves in dollars. There is no doubt that they are concerned about their own investments and what the effects on their economy will be based on the U.S.’s actions. It would be foolishness to think that China isn’t cheering for the U.S. to succeed and turn things around because of their vested interest, but how much faith can they really have in the future of this nation. We believe that it will be in short order that what will be in the best interests for other countries, won’t be in the best interest for America and will in fact have adverse effects on our economy. One of the biggest issues that China has is that there are little to no asset alternative to store their substantial wealth, and dollars have been chosen by default.
We believe that this credit reevaluation is just the beginning and if the officials of this country don’t start cutting our deficit and making some progressive steps to a more fiscally conservative budget, further downgrades in our credit rating will be in our future. What is going to happen when conventional wisdom tells people that U.S. treasuries are bad investments? What is going to happen if the government doesn’t come to the rescue and inject stimulus into the veins of Wall Street? What is going to happen when interest rates rise and there won’t be enough money to cover the interest payments to foreign investors? What are people going to do when hyperinflation hits America? We used the expression in the past that the U.S. “is damned if we do and damned if we don’t.” Of course we are referring to government intervention, and from the looks of things we’re experiencing the latter half of that expression. Watching QE2 come to an end and the lack of execution on a debt ceiling budget reform has resulted in sharp reversals in markets and confidence in Western governments raising major concerns on the dependency of governments on artificial stimulus. Questions about the future are something we all have and to be quite honest with you, there really is no easy fix it solution to this bubble. There are too many variables and way too many catalysts that could potentially bring us back to 2008 and worse.
No one wants to see their world turned upside down, but from the end of the real estate bubble through the crash of 2008 and until now, the United States has seen some drastic changes that may never be restored in our lifetime.
As the Asian markets opened, we saw Dow Futures fall and gold spike right on the open. Gold is sitting at around 1,700 dollars completely blowing through the 1,600 range. The question now is how long is the world going to continue to buy our debt. If this becomes a reality in the near future, which we believe is likely, the standard of living in this country will be a thing of the past. Gold is continuing to be the safe haven for concerned investors and with recent major spikes, we’re seeing gold reflect the current state of the world’s fiat money fiasco.
It is more important than ever to be on top of these issues and aware of global economics. Many times it’s so easy to disconnect oneself from what is going on in our government and around the world. But CrushTheStreet.com would like to admonish our subscriber base to continue to stay informed and become a proactive contributing member of society that stands up for sound responsible limited government that was mandated by our founding fathers through the institution of our Constitution. Actions of our leaders effects you and your family. We will be posting relevant articles and news updates at CrushTheStreet.com. Be sure to be checking the site for news, featured videos, and metals pricing daily!
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