Girls On Sale-The Shot Heard Round

As I expected, the U.S. downgrade by S&P was going to be a lot worse for the stock market than for treasuries. This came as major surprise for most people as it is counter intuitive. The reason being is that it was not so much a loss in confidence in the ability of the U.S. Government to pay its debts as girls high heel was a signal that the free spending ways of the last 50 years is ending. History shows that sovereign downgrades spark action in governments to tighten their belts and cut budgets. Less spending, whether it be in employment, infrastructure or social services including Social Security and Medicare means less aggregate demand in an economy and thus less revenue and profit.
In simple terms, the downgrade applies very little to the creditworthiness of U.S. Treasuries, even though we are now rated below Finland, Luxemburg and the Isle of Man. girls pumpswas only S&P that downgraded us, while both Fitch and Moody's left the triple A rating. The real effect, and what it really means to you and me, is that it is going to light a fire under our politicians ass to cut spending at a time when our economy is already incredibly fragile from not enough spending and consumer demand (70% of our economy is consumer spending) from our aging population which naturally spends less as it gets older and an already massively indebted population who has no more spending power.
With the recent drop, there is a lot of talk about this being similar to last year's correction. This is not Déjà vu all over again. The global economy is slowing and the global debt crisis is getting more intense, and it's not just a U.S. problem either. girls boots is a global problem, particularly amongst the developed world. So, it's not just us that is bankrupt, but Europe as well. It started with Greece, recently spreading through Italy and Spain and just this morning reaching France. Our banking crises of a couple of years ago, is rocking through Europe which will eventually reverberate back here.
Yesterdays Federal Reserve statement was remarkably blunt, admitting that our economy was slowing more than previously expected and that monetary easing would continue until the cows come home. I was pleased that they will continue with QE Mini-Me and leave rates at zero through 2013. I was disappointed however that they didn't come through with a new asset purchase program or a full blown QE3 girls on sale.