Is It Time To Panic? ( AAA To AA+ Country)
Yesterday the Dow dropped 600 points after starting at -360 in the morning before trading began. The European and Asian markets are unstable. If you have a 401K as a retirement plan through your company, it’s more than likely you lost about half its value. The good news is that if you are holding gold (The mineral, not paper) it is surging. If you hold five-year Treasury note you did not take a great hit, in fact you are sitting on a cushion. 30 year bonds didn’t do as well.
It was mayhem at stock market today. S&P 500 and Dow Jones went down while gold price per ounce surged. US markets today fell on fears of financial crisis in the Eurozone and the credit rating downgrade in the US, but not quite as much as was being feared.
Standerd & Poors dropped the Credit Rating of the United States from a Triple A rating to a Double A plus. Even though Mr. Hope and Change keeps saying, “We are a Triple a rated country.”
It has been down played in the past, however there is a troubling scenario out there, it is, what happens when the holders of our debt panic. The holders of the most U.S. debt are China, Japan, and India, and if they panic it will be disastrous.
One significant dilemma for countries holding US debt – like China – is that there really is no other asset deep enough or liquid enough to absorb all their investment. Significantly a move to disinvest from any of the big creditors like China or Japan would set off a panic which can erode the value of dollar denominated assets of these countries. In the end, they really have no option but to stay invested in treasuries.
As the country is head into ruff seas, Obama is on the golf course, is this his imitation of Nero fiddling as Roam burned. I say this because, if I understand it right what was passed would only pay the bills for the month of August. Then again, if not we were still in the hole and this just delayed the enviable. As I said before, they needed to work it out because this will happen every year. It will happen every year for about three years before those countries call in the debt and will setup the collapse everyone is telling you about. When that happens I will have to change the title to “IT‘S TIME TO PANIC
Ps. Obama has canceled everything on the agenda for today. The speculation in the media is, he may call Congress back form vacation and back into session. This even after White House Press Secretary Jay Carney said President Barack Obama would not call Congress back into session to focus on job creation legislation.