S&P fired a warning shot that most economists thought could never happen. Even we have to admit, after they gave sub prime AAA-credit along with Lehman brothers and all the others that went bankrupt, we didn't think any of the rating agencies had an ounce of credibility left. Which actually makes us wonder if S&P knows more than they are revealing. We are not trying to enter into the realm of conspiracy theories, but why would the rating agencies who have always been complete frauds, all of the sudden be somewhat honest? Where were they for the entire sub-prime bubble? Or where have they been for the past 4 years as our debt has gone from 9 trillion to 14.3 trillion. Our total debt obligations have gone from 45 trillion to 81.5 trillion. A pension fund recently took physical delivery for their gold bullion, gold bugs we understand, but physical delivery for a pension fund?
This of course all comes off the heels of China and other emerging markets publicly stating that they want to see a new world reserve currency. They even went as far as making agreements with each other to do some transactions in their own currencies, not the dollar.
A few weeks ago we released an article about a potential dollar crisis. In it we stated several different reasons why we thought one was inevitable. Judging by the worlds' reaction to the S&P report, we would have to assume that if any U.S. creditors weren't getting ready for a currency crisis, they probably are now.
Solutions? They Will Fix It, Right?
In our opinion, it is politically hopeless. After seeing the drama over a fantasy 38 billion dollar cut, this was confirmation that nothing can stop what is coming. Congress and the President approved more spending and borrowing than they did in 2010. It is a fact that 2011 will be a record for spending and debt, yet the national narrative is that they actually cut something. All the while, not one media outlet has reported that the debt ceiling has NOW been technically breached, crossing into the 14.3 trillion dollar mark, the 50 billion dollar buffer will only last a few more weeks.
Time Frame For the Obvious
S&P said the U.S. has until 2013 to show that it can get a handle on its rapidly growing deficits. Good luck with that one. A dollar crisis could happen at any time and any one holding cash is going to realize that even the worst stock listed on the S&P 500 will be better than a suitcase full of Benjamin's.
The Illusion
For the past 80 plus years we have built an entitlement society. We are now at the point where half of Americans don't pay income taxes. 43 million people are on food stamps, and our citizens rely on redistribution of wealth for housing, college, groceries, and a thousand other things. Government spending has infected all aspects of our economy and our lives, they are constantly distorting prices and encouraging citizens to borrow. Taking it away will crush the phony economy and the illusion we have all been living in. America's economy is completely dependent on low interest rates, easy money, and a constant credit expansion. America trying to live within her means will bring about a healthy depression, but none the less it will be a great depression. Which of course makes it politically impossible to fix, since both sides, when it comes down to it, don't want to be blamed for collapsing the illusion. In the end, they would prefer to let the chips fall where they may and then deal with it when it's a full blown crisis. This is why you see them arguing over 38 billion dollars in cuts (1% of the annual budget), when we're borrowing 45 cents for every dollar we spend. If these people in Washington were serious, they would roll up their sleeves and tell the American people the truth and then begin to reform or abolish most government programs.
No comments:
Post a Comment