Gold Daily and Silver Weekly Charts - US Government Preparing for Debt Downgrade

After the bell, a Reuters story quotes an ABC News report that the US is preparing for a downgrade of its sovereign debt, according to an unnamed government source.

(Reuters) - The U.S. government expects its debt to be downgraded by credit ratings agency Standard & Poor's from its current triple-A rating and is preparing for the event, ABC News said on Friday.

ABC cited an unnamed government official as its source and said it was uncertain whether the rating would drop from triple-A to AA+ or to AA.

The report said the main reasons likely to be cited for a U.S. downgrade by S&P included political confusion surrounding the process of hiking the debt limit and doubt that agreement would be reached on more deficit reductions..."

It should be noted that there is not a consensus on this. Forbes says that S&P will not downgrade the debt.

This contributed to the remarkable volatility in US markets today, despite a better than expected Non-Farm Payrolls number.

The initial response was what one might have expected, but it was quickly met with selling that provoked more volatility and selling that reached a crescendo around mid-day at some key technical support areas in stocks.

This market is good for Wall Street and traders, and very bad for the real economy. It adds to the sense of uncertainty and riskiness in business and investment planning. It is a gambler's market, and not even a particularly honest gambling environment, with a noxious mix of asymmetrical information flows, front running, deception, ponzi schemes, and con men. 

I am now even more suspicious that there is a strong artificial element to thhe trading in these markets, and a 'setup' for either the re-introduction of Quantitative Easing,  and softer bailouts and subsidies for the corporate sector in the name of recovery and 'jobs,'  or a credit downgrade event in which the economic hitmen make the US an offer which they think that they cannot refuse.

I also wonder if the threats from S&P were a pre-emptive warning on QE3.  Make no mistake, there is a currency and class war underway, and things are not as they may seem to be on the surface.

The debt issues in Europe and the FOMC meeting on Tuesday will likely contribute to the market swings based on trading algorithms and the 'technicals.'

Gold showed remarkable resilience, and a safe haven aspect even with the obvious bear raids that hit the metals, especially silver.

Here is an interesting 2009 Bloomberg Radio interview with Jim Sinclair. It is well worth listening to with the benefit of hindsight.

SP 500 and NDX Futures Daily Charts - US Debt Downgrade Looming?

Since the end of QE2 the stock market is down about ten percent.

Do not think that this is lost on Bernanke and the FOMC which meets next week.

After the bell there were stories that the US government is preparing for a sovereign debt downgrade by S&P.  See the blog entry above for details.

I am not so sure that they will formally announce a QE3 on Tuesday, but I think that it is a good bet that between the Congress and the Fed there will be even more subsidies and supports for the banks and the corporations that surround them. 

And these will be paid for the bottom 85 percent of the American people.

Here Comes the 'Freedom to Invest Act'

As a general rule of thumb, any law in America that contains the word 'Freedom' or 'Patriot' in its title is brazenly promoting a crime, or a fraud, or some self serving corruption of the common good.

I suppose that this indirect level of freedom will just have to do until a bipartisan committee can come up with a plan to more directly 'free up' your IRA and 401k for the use of corporate America.

At least you are still free to vote, although the corporations get to pick the candidates and count the votes.

Some animals are more equal than others.

Rolling Stone
Evil Corporate Tax Holiday Deal Still Alive
By Matt Taibbi
August 4, 9:29 AM ET

There was some talk that a corporate tax holiday might be rolled up somehow into the debt-ceiling deal. I heard that from a few quarters in DC in the weeks leading up to Obama’s Bighornesque debt/supercommittee massacre.

However, the tax holiday turned out to not be part of that deal. That does not mean, however, that the proposal is dead. In fact, calling around in the last few days, I’m hearing that it is very much alive.

The action revolves around a bill sponsored in May by Texas Republican Kevin Brady (and co-sponsored by Utah Democrat Jim Matheson) called the Freedom To Invest Act, which would “temporarily” lower the effective corporate tax rate to 5.25 percent for all profits being repatriated.

Essentially, this is a one-time tax holiday rewarding companies for systematically offshoring their profits since 2004 – the last time they did this “one-time” deal...

J P Morgan Says "We Love Gold"

JPM loves gold, and recommends buying the miners to play it with gusto no less.

I know, it's kind of creepy at first blush, isn't it?  Do Bankers blush?   Do their algos dream of electronic sheep?

Curiouser and curiouser.

What's next, will Jonny Nads turn bullish on what his people have been selling for years, and many times over it appears? Perhaps that would be just too much, and contrarian indeed.

It must make that other craven crow, Jeffery boy, just flip his wig a hundredfold to hear such heresy from the princes of the metal bashing set.

Well, it could be a nicer look for Blythe.  Gold flatters the face, whereas silver makes one pale.

Perhaps it is just a distraction from silver, which their central bank cronies cannot lend to them, having little or none anymore. Or perhaps a central bank chum whispered some words of hidden wisdom into their ear.  I have heard faint whisperings as well.

"I have heard the mermaids singing, each to each...
I have seen them riding seaward on the waves
Combing the white hair of the waves blown back
When the wind blows the water white and black.
We have lingered in the chambers of the sea
By sea-girls wreathed with seaweed red and brown
Till human voices wake us, and we drown."

Well perhaps not so much human, as dismal voices, the mumblings from the bearded men of the financial demimonde.

Was that a bear hug they gave it today?  Or were they just clearing the decks for their own trades.  Hard to tell in all this excitement, who is zooming whom.

But what goes around apparently comes around, and this has been a long time coming. As the founder of their bank, James Pierpont Morgan himself, once said:

"Gold is money. Everything else is credit."

Mirabile dictu. Barbarous is Back.

WSJ
Gold: J.P. Morgan ‘Loves’ It Big Time
By Dave Kansas
August 4, 2011, 9:49 AM ET

As Old Yeller races higher, J.P. Morgan comes out today with a report banging the drum for the barbarous relic.

“We love gold,” J.P. Morgan says. They add: “Many investors may look at the gold price chart with disappointment and assert it’s too late for them to buy. We disagree.”

The bank says that Western governments need to either raise taxes or cut spending or both, and nobody in authority seems ready to take those kinds of tough decisions. As long as everyone’s punting, J.P. Morgan believes gold will keep rising.

J.P. Morgan also points out that South Korea’s central bank recently snapped up 25 tons of gold, joining Mexico, Russia and Thailand as big buyers of the yellow stuff.

In a twist, JPM says gold stocks, which have lagged the surge in gold prices, might be a good vehicle to get into the gold game. They like Goldcorp, Kinross, Newmont and Barrick.