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Meet Federal Reserve’s New Boss: Wall Street

By    |   Wednesday, 10 August 2011 06:49 AM

Shameful and utterly disgraceful – That is my way of summing up the events since last Friday when the S&P finally stated the obvious and downgraded the U.S. debt’s AAA rating.

Let’s begin with a true conscious revelation – How many of us are really surprised at the downgrade? I would suspect not many. The U.S. debt is really not worthy of an AAA rating. We are the most indebted nation in the world and have no real intention of stopping our addiction to borrowing.

Our beloved leaders in Washington played Russian roulette with the nation’s financial reputation, tore it to bits and now want to blame S&P. I could have condoned their theatrics if they actually did their job and reached an agreement. Instead they did what they do best – kicked the can down the road. We will see the agonizing drama play out again as we reach November when the so-called super committee has to come up with real budget cuts.

And I was shocked at the reaction of the so called mainstream media at the downgrade. They were downright petty and not so surprisingly ignorant.

Calling S&P names will not cure the ailments of the U.S. They question the authority of S&P when the downgrade hits the U.S. They enjoyed the results of S&P’s shabby work when every CDO and MBS was granted AAA status. They enjoyed the S&P handy work when Greece, Spain, Portugal, Italy, Ireland and others got downgraded. But when the barrel of the gun turned and pointed toward the largest sinner of debt, we get uncomfortable and call on Congress to regulate and control the S&P? What a shame!

While the talking heads bemoaned the S&P downgrade and called it wrong, no one was discussing the real missing player here – a real attempt at reducing the debt. A real plan to bring our spending under control. And our congressional members can only do what they know best – how to posture to get re-elected and poke holes in the opposite party’s plans. Where I come from; you get merit points for solving a problem, not just pointing to others not having a plan.

Mind you – I am against both political sides for not doing the right thing. It is a truly missed opportunity to set the right course for long term prosperity in America. Like we missed it at the end of 2008 when we could have let the fittest survive rather than bailing out everyone and their brother.

As we see the results of Tuesday’s trading – the savior once again was – none other than the Federal Reserve. After the shellacking on Wall Street on Monday, and the downward drift on Tuesday morning, the Federal Reserve seemed to take it upon itself to rescue the world again. The Federal Reserve lost its nerve when they saw the 645-point decline and decided to rescue Wall Street and big banks rather than the economy in the long term. So they announced that they would not raise rates till mid 2013.


Does that mean that the Federal Reserve does not see any growth in the U.S. until 2013 or later? Are they accepting that this is at-least a lost half decade as of now?

I remember the arguments back in end of 2008 that the U.S. is not Japan, it will not have a similar story as Japan. Japan had lost a decade at that point due to the lack of political and fiscal will to do the right thing and let the weak players perish.

While the U.S. action was similar, the hope was that the outcome would be different. In my book, that was the first sign of insanity.

So once again, we remain hostage to the childish behavior of our congress and senate. We will see more drama being enacted between now and November and then a possible downgrade not just from S&P, but this time from Moody’s and Fitch as well. Who will the mainstream media blame then?

That is why, despite the risks of very high volatility, I still prefer to invest overseas in select stock and select countries to ensure that I am buying value rather than far-fetched dreams on Wall Street.

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Shameful and utterly disgraceful That is my way of summing up the events since last Friday when the S P finally stated the obvious and downgraded the U.S. debt s AAA rating. Let s begin with a true conscious revelation How many of us are really surprised at the...
Wednesday, 10 August 2011 06:49 AM
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