US Debt Is Downgraded

What a week in the financial markets! The week-long rout wiped $2.5 trillion off global markets.

And there maybe more fireworks to come.....

After the US stock market closed on Friday, Standard & Poor's announced that it had indeed downgraded the credit rating of the United States.

It lowered the rating by a notch from AAA to AA+. Ominously, S&P kept its outlook “negative” which means the US could be downgraded again in the next 12 to 18 months.

This downgrade will eventually result in a rise in interest rates which may be devastating to a weak American economy.

The problems with the US economy and stupid policies by the Federal Reserve – money printing to save Wall Street – have already resulted in a very weak US dollar and a lower standard of living for many Americans. Higher interest rates will just make things worse.

But interest rates will not rise for a while because of what I mentioned last week. The geniuses on Wall Street are selling other assets, like stocks, and running to the “safety” of US Treasuries.

The yield on one-month Treasury bills this week actually went negative this week. The Wall Street geniuses were actually paying Uncle Sam to hold their clients' money for them. The stupidity of that cannot be put into words.

Why was Wall Street in such a panic?

They were in a tizzy over Europe, afraid that large countries like Italy and Spain would default on their debt. But at the same time, they ignore the greater threat of a US default a few years down the road.

Yes, the debt problems in Europe are very serious. But if one looks at the whole picture (such as unfunded liabilities), the United States' debt problem is much worse.

Think of it this way...think of the sun and the moon. US debt is sunlight, European debt is moonlight. Which is brightest? Both are bright, but we all know which is brighter (the bigger problem).

So why does Wall Street go nuts over European debt, but have no worries about US debt?

They are simply using a trick that all magicians use. Magicians distract the viewers with movements or even pretty assistants to draw attention away from what they are really doing.

Wall Street keeps pointing to Europe saying, “Look at how bad things are over there”, so that investors won't notice how bad things are here.

Because if investors do focus on what is going here, the game is over for the denizens of Wall Street. No more cushy jobs making money by taking the hard-earned money of investors for their “sage” advice and recommendations.