MasterPo says: This blog is about topics and issues that are of importance to me. I am not one of the countless blogging lemmings that are tripping over each other scurrying down the hill and off the cliff of blogging oblivion trying to write the greatest blog on the latest topic de'jour. Your comments are welcome.

August 5, 2011

It Finally Happened! (and Look Out Below!!)

MasterPo comes out of summer break as promised if something significant happens.

And it has.

Today, Friday August 5, 2011 is yet another date in an ever growing list of historical moments in American history. This even Standard & Poor's has downgraded the United States credit rating down from the world standard "risk free" AAA to AA+. While still not a bad rating per se, it isn't AAA!

First, MasterPo needs to point out that, yet again, something has happened which our esteemed President and his administration promised wouldn't happen if only we did (whatever-they-wanted).

Soon after taking office President Obama promised that if passed his massive stimulus package wasn't passed quote:

"this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." (Washington Post, February 5, 2009)

There was also the fiasco with "shovle ready jobs" that later were admitted never existed even at the time everyone from the President down insisted were ready to go.

Then, Fed chairman Ben Bernanke promised under oath in front of a Congressional committee that he would never buy Treasury bonds (i.e. monitize the debt). Today, 70% of Treasury bonds are purchased by the Federal Reserve! Normally 60% are purchased by foreign buyers at least.

Now, over the last month, we were told from the President down that if the debt ceiling wasn't passed and spending increased the U.S. credit rating would be reduced. So the ceiling was raised, money was spent. And the reduction now still happened!

This has very wide spread impacts. Not only the often mentioned cost of the U.S. borrowing money (which totally blows away all budget and debt and deficit projections!) but all other American (and some foreign) fiduciary institutions.

Banks, brokers, insurance companies - all that have AAA ratings because they hold AAA bonds which include mostly Treasuries. Now, how can you have a AAA rated company that holds less than AAA rated investments?!

And, as mentioned before, the AAA U.S. Treasury is (was?) the world standard for a "risk free" rate. Possibly now not any more! Which in turn leads to the further decline in importance of the American dollar on the world stage and as the world reserve currency.

Is this the end of the world? Likely not.

But there does come a point-of-no-return that even if the cliff is still some distance away you just can't turn or stop in time. This might be it.

Normally, MasterPo doesn't include videos in his articles. But this one from November 2010 is very prophetic.

Good luck to all of us.

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