Some Thoughts On The Debt Downgrade Plus "No, Virginia, There Is No Santa Clause"

A lot of people have been asking me what I think will happen on Monday when the markets open.  And the fact of the matter is that I do believe that some people in the market knew sometime last week before Friday's close that the downgrade was coming and I think it was partially priced in to the Thursday/Friday action.  But we don't know how the stock market will react because we don't know to what extent Fed will intervene to prop up the markets.   For those who refuse to believe that the Fed/Government manipulates the markets to the extent that they can, consider this:  just last week the central banks in Japan and Switzerland openly admitted that they intervened in their respective currency markets and the ECB stated that it would buy sovereign bonds in the open market.  That's intervention.  And Reagan signed into law legislation that made it legal for the Government -  via the Working Group on Financial Markets - to intervene and prop up our markets.   So those inclined to believe that intervention does not occur are also those that still believe in Santa Claus...

Bottom line:  I don't know in the short term how the markets will respond to the debt rating downgrade because I don't  know to what extent the Fed will try to prevent the markets from accurately pricing in the event.  But I do know with absolute certainty that over the next three months gold and silver will go substantially higher and the availability of physical supply will become very tight again, as investors begin to really understand how essential it is to actually own and possess the physical metal in order to achieve the wealth protection benefits they have provided for over 5,000 years.

One more thought on gold.   The widely followed Jim Rickards offered his thoughts on who owns the U.S. gold - technically the Taxpayers' gold -  in an interview on King World News Blog.  You can read it HERE  Now, I have issues with a lot of Rickards' views and I believe that he is erroneously glorified by many.  But nothing is more infuriating than when he discusses the U.S. gold holdings as if the U.S. actually still owns it unencumbered by derivatives and leases and as if it actually is still in the possession of the U.S.  He has always completely ignored the entire body of research that has been presented in many forums which shows that it is likely the U.S. does not actually hold title to most of the gold as reported by the Treasury.  The Government is caught lying all the time and why people continue to believe in key financial reports from the Government is beyond me. 

Now, the first part of the interview with Rickards is quite informative.  But I lost interest when he starts discussing the gold as if it is still there.  Part of that is Eric King's fault.  I would like someone to ask Rickards why the actual gold itself has not been audited independently and completely accounted for since Eisenhower was President.  Even a powerful, long-term Congressman like Ron Paul has requested this audit and yet the Government refuses.  IF the gold is there, then there's nothing to hide and the Government should be willing to let all of us see it.  So, until we have actual proof that the gold is still there AND unencumbered by nefarious financial transactions, the Government is guilty until proven innocent and Rickards looks like an idiot for trying to intelligently discuss something that may in fact be a myth.

Now onto the downgrade itself.  The entire discussion in the public media forums - all of them - has focused on whether or not S&P's math agrees with the Government's.  This is complete political bullshit being tossed out there in order to deflect attention from being focused on the REAL problems, which are the REAL reasons for the downgrade.  Let's put the math discrepancy issue to bed quickly:  the Government's forward projections for our debt levels, spending deficits and GDP growth have been tragically wrong for decades.  As Zerohedge.com points out:  back in 2001, the Government projected that "net US indebtedness in 2011 would be negative $2.436 trillion, the ratio of debt held by the public to GDP would be 4.8%, total budget surplus would be $889 billion, and GDP would be $16.9 trillion."

Hmmm...just looking at that dismal forecasting, and knowing that GDP is light from the projections by about $3 trillion - or about 25% - the indebted level is off by over 500% - and the budget surplus forecast was retarded, do Obama and Geithner really have any credibility by which to question S&P's mathematical prowess?  And what really kills me is that everyone is discussing just the new debt levels AFTER the debt-limit deal.  Why are we not including the $7 trillion in GSE (FNM/FRE/FHA) debt that the Government has guaranteed?  This IS part of our debt load.  The new debt level therefore is NOT $16 trillion, it's $23 TRILLION.  So Obama and Geithner can take their arguments and shove them up their respective asses.

The Truth of the matter is that Obama should rightfully be wearing this rating downgrade because he was elected on promises to try and change and fix all the damage done by previous Administrations.  But Obama has done nothing because he has failed to exercise any leadership.  He is probably one of the weakest Presidents in the history of this country.  He campaigned by gloriously reading a bunch of grandiosities off of a teleprompter and made himself out to be some sort of reincarnation of FDR and Martin Luther King.  Instead, he's proved to be nothing more than a dirty dish rag for the corporate, banking and defense industry interests that control our Government.  The only CHANGE that Obama helped usher in is a rapid decline in the American standard of living.  Obama never really had a true plan of action to address the real problems facing this country.  Or if he did, he failed to exercise the true leadership that his idols - FDR and Dr. King - exercised in order to make those plans happen.  Instead we are left with a President who is really what was voted in to office:  someone who has never been in a position of leadership and someone who lacked a demonstrable track record of achievement.  In other words, we voted for failure and that's what we have.  And those who still hold faith in Obama are the ones who believe in Santa Claus, the Easter Bunny AND the tooth fairy.

As for the ratings downgrade itself, we got what we deserved, only we deserved to have it happen a lot sooner and we deserved a much more severe downgrade.  I saw this coming 10 years ago and started buying gold and silver back then.  Many people saw this and warned of this many years before I figured it out.  We were all laughed at and ridiculed by all the Santa Claus believers.  Well, now we - the Santa Claus disbelievers - are having the loudest laugh, but not the last laugh.  The last laugh will be reserved for when the U.S. dollar finally collapses.  As I've said many times in this blog, Orwell is smiling in his grave...