SGM Metals: US Credit Rating Downgraded Again on Open Ended QE3 Bank Bailout!

The 'Great Currency War of 2012' has officially morphed into its endgame w/ QE3 & central banks are launching their counterattacks to protect their currencies & exports. This will destroy the middle classes around the world & usher in a new reality.
The FEDs open ended QE3 is their panic button, the consequences will be profound
The FEDs open ended QE3 is their panic button, the consequences will be profound
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bank bailout MBS derivatives bonds


Palm Beach Gardens - Florida - US

Sept. 20, 2012 - PRLog -- reports: [ On Friday, the independent and nationally recognized statistical rating organization lowered “the U.S. government to ‘AA-’ from ‘AA,’ citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality,” CNBC reported.

In April, Egan-Jones ratcheted down the U.S. credit rating to “AA” from “AA+” with a negative watch. The negative watch meant there was a 50% chance of the government’s rating being lowered within three months.

Egan-Jones said cranking up the printing presses and artificially lowering interest rates by purchasing mortgage-backed securities will not raise the real GDP but will instead reduce the value of the dollar.

The Fed has worked diligently toward that goal – significantly reducing the value of the dollar. In February, the Federal Reserve Open Market Committee made the policy official by announcing it plans to devalue the dollar by 33% over the next 20 years.

In addition, the Fed’s effort to push interest rates to zero “accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits.  In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years,” Forbes reported.

In order to sell the plan to force down interest rates and devalue the dollar to the victims, the privately owned Federal Reserve cartel stated last week that it is “concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.”]

And here we go AGAIN! So once again we have the FED hitting the turbo button on the printing presses and if history is any guide as to what to expect from this policy decision we should see the banks benefit tremendously and those on Main Street pay the price to artificially prop up the banks balance sheets. This concept has not worked at all up to this point and yet we seem to be going right back to the same failed policies that seem only to care about propping up the very banks who brought us to the brink of economic collapse to begin with? If you have been reluctant to buy into the “conspiracy theory” that the federal reserve bank is in bed with the mega banks in the US banking system up to this point, you can at least agree that at this point (whether in collusion with the banks or not) the FED has pumped tens of trillions of dollars into these banks and can not run the risk of them failing & these uncollected tax dollars disappearing with the banks when they collapse under their own bad bets.

At some point you have to ask yourself that if this idea of pumping the banks up artificially with newly printed paper money out of thin air hasn’t produced any real progress, why would they continue to do this? I’m afraid the answer is that they are completely hooked into these banks now and are hoping that ENDLESS QE3 will be a last hope effort to keep them afloat and avoid their implosion. Unfortunately the biggest risk at this point of the supposed recovery is not the act of an imploding bank here in America (even though that will be cataclysmic), instead the biggest risk is the collateral damage that will surely come after the initial bank failure takes place. The collateral damage will come when a bank failure is triggered by insolvency which will then make the banks investments insolvent as well. The biggest risk of these investments becoming insolvent is in the roughly $2 QUADRILLION derivatives bubble that has linked ALL western banking systems together across the globe and could very well be their undoing. This in my opinion is why the FED continues to do what hasn’t yet worked.

So we are watching the FED devalue our savings account by 50% (so far) so that they can prop up these banks so they collect on these insurance policies on their original stupid investments that if you or I made these same investments we would be out of luck. But the worst part of the above article is the downgrading of the US credit rating and what it means to the “recovery”. As a nations credit rating goes down their risk as a borrower grows disproportionately the other way as lenders grow increasingly unwilling to lend to the nation. Think subprime and it will all come into focus. The worse the borrowers credit history is the higher interest rate they will be offered from the start. And as their credit worthiness becomes less attractive the cost of borrowing will continue to rise to the point of crossing the apex of the curve that puts the borrower in an impossible position as they are unable to acquire the credit they need to service their debt and the whole house of cards comes crumbling down. When cost of borrowing goes up the cost to service the debt rises as well. Things will get ugly and all the FED can hope for is to keep the system afloat long enough for a recovery to organically begin. . . yeah.

What happens when the cost of servicing our debt jumps 10% higher? What happens when the credit rating drops into the BBB range? What happens when we cant service our nations debts any longer? What happens when these multiple layers of payouts for these bad investments begins to tip a seemingly solvent bank into insolvency as they are unable to comfortably payout these insurance policies? What happens when these banks become insolvent? What happens when this kicks off & you decide to wisely pull your money out of these banks & you are shocked to find out the FED changed the rules and your bank can reject your request to withdrawal your money in order to protect their balance sheets? What will you do then? Do you think that if you had already moved 30% of your portfolio out of Wall Street & the banks towards hard assets such as gold & silver bullion you would be in a better position should this end up playing out? Enough said, its up to you to ensure your financial well being and no one else. So if you see the future options playing from bad to worse, wouldn’t it make sense to play it safe? In an uncertain time such as we are living through today wouldn’t simply ensuring your networth against these possible outcomes be a more sensible option that continuing to throw your life savings into Wall Streets hands when it hasn’t traditionally done anything for you in good economic times? Establish your “Plan B” in physical gold & silver bullion today and begin to participate in the sound money debate before the debate leaves you behind. Remember that it is a far better strategy to PREPARE your portfolio than to attempt to REPAIR your portfolio once the damage has begun. Tick, tock.
Source:SGM Metals & The Elemental Economist
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Tags:bank bailout MBS derivatives bonds
Industry:Banking, Business
Location:Palm Beach Gardens - Florida - United States
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