Deficit Drop Off
In school we were taught that the U.S. was the bedrock of the global economy and its triple A credit rating was almost like an assumption. U.S. bonds were the safest investment in the world and the chance of a default was unthinkable. Of course with our politics in Washington we now know that we are living in a fool’s paradise and what should be abundantly clear is that we can’t continue to have our cake and eat it too.
Call it a deficit drop off! Oil prices dropped dramatically after the S&P lowered the U.S. debt outlook from stable to negative. Precious metals saw extreme volatility as traders were not quite sure whether to take the news as bullish or bearish. Normally if the U.S. debt rating is lowered the value of interest-rate will have go higher to attract investors to buy our out-of-control debt. In that case the value of the dollar would go higher. Yet higher rates could slow economic growth thereby creating a double whammy for energy prices. Lower demand and a higher dollar would mean lower prices.
Normally that would be bearish for precious metal, yet the threat of a downgrade for the U.S. could shake confidence in the entire structure of the global economic system creating a desire to get rid of worthless government paper and get into hard assets like gold, silver and even Black Gold, our precious oil.
Now the question is whether Washington will finally wake up to the very real threat that stands to shake the confidence in the greatness of the Untied States of America. Our politicians live in a fool’s paradise just like the fools that are saying that evil speculators are driving up the cost of oil. Why can’t these people acknowledge the risks that are right in front of them? Why can’t they see that the U.S. debt and the steps to keep our economy afloat is a major factor driving commodities?
The Untied States of America is running a dangerous deficit printing money like it is going out of style, is at the highest risk of default in many years, and people wonder why they have to pay $4 of U.S. paper buy a gallon of gas! Is it any wonder why open interest is running to commodities? It is because the fundamentals demand it! Interest rates in the U.S. are below zero, forcing money into commodities!