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The short term trends are very over-extended, with stocks down and Treasuries higher. Gold has unjoyed a spectacular rally. The financial sector has been crushed.
I am looking for some thing that will reverse this process, and perhaps with some gusto. But that is what might happen ordinarily. How ordinary is this?
So for now the trend is the trend, and it would not be wise to get in front of it. But I have trimmed some profits, and opened the way for new opportunities if they come.
Gold is soaring. Silver is up, but lagging a bit here.
FOMC meeting tomorrow. It is a one day affair this time.
Sprott's Physical Gold Trust continues to be the weakest of a good bunch, as an after effect of the share expansion deal and how it was written with the underwriters Morgan Stanley and RBC Capital Markets apparently.
Yes, the US has some very real long term issues with Social Security and Medicare.
Social Security is being strangled by the refusal to raise the income limit on the Social Security withholding tax in response to the gradual creep of inflation. If this limit was raised periodically the Social Security 'problem' would be resolved.
Medicare and in particular the drug portions of the program added by the Bush II administration are driving costs much higher. And this is more of a problem because of the structural cost problems in US healthcare system. Big Pharma in the US is a powerful lobbying force, and Americans pay MUCH higher costs per benefit for their health care services. This is inhibiting the steps that are needed to restructure the US healthcare system.
But Social Security and Medicare, without the drug program, have not substantially changed since the 1990's, when the US was running a budget surplus, and then Fed Chairman Greenspan was reassuring the public that the Fed had a plan to deal with the lack of debt.
So what changed?
The repeal of Glass-Steagall and the growth of unregulated financial products, the co-opting of the regulatory agencies, the growth of corporate influence in Washington, and two unfunded and very costly wars of long duration, founded largely on lies and distortions following a despicable terror attack by a small group of people, coupled with tax cuts for the wealthy.
There is relatively little discussion, much less investigation, indictments and convictions, from one of the largest financial frauds in history.
And within twelve months of the crisis breaking, Wall Street bonuses were back to record levels, even as the rest of the country began its long downward spiral into debt, downgrade, and despair.
That is the long and short of it. And it bodes ill that these issues are so infrequently mentioned in the political and economic discussions circling Washington and New York today.
Rational discussion and factual analysis has been overwhelmed by a well funded program of propaganda and sloganeering, and bought and paid for politicians and media which serve to direct the discussions according to the program of the monied interests.
And this is why the outlook for the US is so negative. Governance has failed, the system has been thoroughly corrupted or co-opted, and the planning and discussions cannot gain traction. Some have recently referred to Obama's clarity gap because it is so unclear what he stands for, what principles he is willing to fight for.
The politicians of both parties, the media, and the business leadership are caught in a credibility trap in which the root causes cannot even be discussed, must less addressed, because they have all been involved in or benefited from a massive injustice in the financial frauds. They are complicit, and cannot act openly and honestly for fear of losing control of the debate, and of subsequent discovery.
"Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity."
Lord Acton
And who do we see on American television this morning, providing economic advice and promoting the Wall Street prescription for a cure through a return to more bank deregulation? The angel of economic death, Alan Greenspan, a man without shame or honor as one of the great authors of the misrepresentations and mismanagement that led US into the financial crisis which rewarded the few at the expense of the many.
"The liberties of a people never were, nor ever will be, secure, when the transactions of their rulers may be concealed from them."
Patrick Henry
The real issue at the end of the day is reform. The US has been led down a dark alley and strangled in what history may recognize as a financial coup d'etat, and a campaign of economic war against the common people.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
"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.
