Standard and Poor's Downgrades US Long Term Sovereign Debt From AAA to AA+

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

Lord Acton

It appears that my suspicions about a hidden agenda and undercurrent in today's trade were correct. There were prints of something significant but undisclosed all over the tape, yesterday and today.

The official line will try to downplay this next week, and they may attempt to tinker with the market to support that story line. They have positioned Treasuries and the metals to help them do this. They did not quite succeed with gold.

It appears that this information known earlier on by at least some market participants, as the "government prepared for the downgrade" as reported to ABC news. S&P delayed the release this afternoon as the Treasury found 'a 2 trillion mathematical error' in S&P's figures.

Are you kidding me?

The US rating remains unchanged at Fitch and Moody's. This may ameliorate the effects of the downgrade.

There are no coincidences in politics, and international financial ratings. Watch and see how they never 'waste a crisis.'

The Governance of Money - MacroBusiness

There are some ways in which this crisis could be seen not so much as a financial crisis, but as a prelude a much deeper conflict of governance. This time it is not North versus South, but along the borders of wealth and power. Still, the lines of conflict are drawn along ideology once again, and what it means to be a human being with equal rights and obligations.

The currency and class wars will intensify.

United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative

· We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

· We have also removed both the short- and long-term ratings from CreditWatch negative.

· The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

· More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

· Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon.

· The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Read the full report here.

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...