Finally S&P downgraded US long term credit rating by 1 notch... to AA+ from AAA. That implies an effective downgrade of the global economy with China and Japan holding a large share of US Treasury Bonds. What's next?
I thought S&P wouldn't take such steps immediately... now I feel it's a concerted effort from Wall Street to send a strong signal to Fed for QE3. That implies more inflation and more harm to economic growth worldwide.
Bernanke Models Prove Faulty as Fed Forecasts Succumb to Downward Revision: http://www.bloomberg.com/news/2011-08-0 … ision.html
QE3 WILL SOLVE NOTHING.
Where have you been? QE1, QE2, the Bailouts, the 3-year long stint of 0% interest rates...
THEY HAVE DONE NOTHING.
Bernanke, Krugman, Keynes, they're all wrong.
If you want real economics, check out the Austrians - they've correctly predicted every major economic event since the Great Depression, and they've been able to explain every economic event in US history with ease.
In fact, Mises predicted the collapse of Communism back in the 1940s - a 50 year early prediction.
The U.S. still has a AAA credit rating but with a red flag attached to it. What S&P did was to alert the rest of the world that strong action is needed to avert a global meltdown. Italy certainly took notice, as it is taking immediate action to rein in its debt problems. What's next is hard to say. The Treasury Department refuses to acknowledge S&P's warning saying that it used faulty accounting. Obama and Congress (both sides) refuse to take the debt problem seriously (despite three weeks of posturing). So I think a further credit downgrade, probably by Moody's, will happen -- either that or this country will implode.
Mark this day, Friday, 5 August. Five years from now, it will probably be seen as the day the world finally decided that it has had enough of the US Dollar. Standard & Poors, the credit rating agency, may have triggered it all by downgrading US long-term debt from AAA to AA+, but it was coming anyway. We just need Moody’s and Fitch to confirm it shortly.
Mark the next few weeks, too. For it’s not just about the Dollar being under pressure. The Euro, the world’s second reserve currency, is also on the cusp of a more dramatic decline. If the European Union fails to become a proper economic union and defends the Euro half-heartedly, it will mean the end of the world’s No. 2 safe haven investment, too.
It’s never happened before, the two biggest economic blocs in the world with the two richest groups of people are simultaneously imploding. For the first time since World War II ended, the world’s investors will have look forward to accept gold and commodities or a mix of several other currencies as a store of monetary value.
Tremendous volatility expected next week in all asset classes, especially currency, equity and debt. Gold will jump to $1750 - $1800.
http://www.businessweek.com/news/2011-0 … uries.html
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