STAFF NEWS & ANALYSIS
Bill Gross: U.S. Will Lose Triple-A Rating
By - May 23, 2009

Superstar bond fund manager Bill Gross says the United States ultimately will lose its triple-A rating, thanks to the exploding budget deficit. "I think eventually" that will happen, Gross tells Bloomberg TV. "That's the trend. It's certainly nothing that's going to happen overnight." Financial markets already reflect that possibility after news that the U.K. may be downgraded, he says. "The market knows and believes both the U.S. and the U.K. are quite similar in terms of their debt levels and their debt trends." What will drive the rating down? The level of outstanding debt as a percentage of GDP, Gross says. "Interestingly enough, both of these countries start out at relatively low levels" on that score, he explains. "The U.K. and U.S. are around 50 percent of GDP, where countries such as Japan and Italy are twice that." – Money News

Dominant Social Theme: Everyone must exercise more self-control.

Free-Market Analysis: In this era of confusion, the paranoid hat-wearers (PHWs) among us become more prominent. We read about them, and we read articles by them (videos, too); their presence on the ‘Net is increasingly difficult to avoid. The PHWs (mostly young men from America?) are seemingly convinced that the increasing distress of the West is no accident. They believe it was planned. And they are not shy about asserting that fact.

Yes, those who wear such hats see only mysteries wrapped in riddles and swaddled in secrets. They observe the impending ruin of the United States and Britain and see not a lack of responsibility among the leaders and the citizenry but a cold and calculated master plan.

Now it is difficult to argue with PHWs because it is impossible to prove a negative. PHWs will maintain that the pattern is obvious, even without definitive proof. They will argue that a shadowy, monetary cabal has determined the kind and type of destruction that will be visited on America and Britain. They will claim that this destruction is intended to weaken the citizenry and make it amenable to larger, regional governance – an agglomeration of countries mushed together for purposes of elite control.

These PHW-types, the more extreme element, do have it worked out logically, even if the logic seems warped to some of their fellow citizens. They claim that the most powerful monetary-elite is involved with the Anglo-Saxon axis (Britain and America) and is currently engaged in a formal expansion of powers. By weakening (financially ruining) Britain, this axis hopes to bring that country more firmly into the European Union – thus swapping formal control of the UK for formal control of the EU.

Meanwhile, by weakening America, draining it through warfare and speculation, this axis hopes eventually to engineer an increasingly formal relationship between Mexico, Canada and America that would lead to a single currency and eventually a merger with a South American EU-style super-government. Thus the Americas would be united, much as the EU. And eventually in decades or centuries all would be united under a single world government.

Currently, these PHWs don't seem so suspicious of China and Russia – which apparently fall outside of the Anglo-Saxon axis. But sooner or later, according to PHW orthodoxy, China will be tempted to join into this one-world evolution by establishing the yuan as a basic currency or even a reserve currency within the larger Asian community. This could in some sense, establish an Asian superstate.

Ultimately it probably comes down to psychological characteristics. Does one want to live in a continual paranoid state, imagining that the world is a hostile place that needs to be constantly confronted? Or does one want to live a more carefree life without contemplating a continual eradication of freedom, one aimed directly at YOU? Is there is a middle ground? Can one be just a little bit paranoid?

After Thoughts

One thing is certain. Whether the current state of affairs is merely a natural unwinding or a devious plot by a monetary elite, the results will still likely involve considerable currency chaos, inflation and massive interest rate hikes. Hard money – holdings of gold and silver – are thus the right choice at this time in the business cycle, or that is what history tells us anyway. If there is a currency collapse in America and Britain, then diversification, including precious metals, is likely an important key to continued solvency. And if history repeats itself, then even the most optimistic will experience pessimism before the storm passes over.

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