Credit Rating agency Standard and Poors downgraded their forecast on the U.S. economic outlook, sending a clear message to Anti-President Obama and lawmakers to address America′s massive debt issues. Reaction to the downgrade sent stock and bond markets reeling, gold soaring to a new all-time high of $1497+ and the Volatility Index, a.k.a. The Fear Index, up 17% in one day. While S&P did not lower the country′s bond rating from its AAA status, the message is obvious that such is the next step if Washington does not act on reducing spending and restrictive regulations.
Meanwhile, Obama spent the day in the White House talking with local TV anchors from a series of cities as he prepares another day on the campaign trail tomorrow. Obama continues to push his message of class warfare by increasing taxes on those who work and create wealth and jobs. This despite the fact that in order to balance the federal budget, tax rates would have to be increased to 88% on those earning more than $250,000 a year, and 65% on everybody else. Just taxing the rich and confiscating all corporate profits will not solve the problem.
While U.S. Treasury rates showed little change today, the volume of sales was anemic. Those buying any sovereign debt still prefer U.S. bonds over those of Europe and others indicates that America is still winning the ‘Ugly Contest’, being slightly less ugly than the rest. Other news from the World Bank warns that inflation in China will begin spilling over to other markets. Chinese workers are demanding higher pay to keep up with the rapid rise in fuel and food costs. In the U.S., gasoline prices inched upwards again to the nationwide average of $3.83 per gallon. With news from Saudi Arabia that they are slashing production, due to their anger over U.S, policy in North Africa and the Middle East, the only thing keeping crude oil prices down is the apparent lack of demand as all indicators point to a double-dip recession by the summer.
With Standard and Poors downgrading the U.S. economic forecast, the message is clear that they see little optimism that Washington will act in time to lower budget deficits or adopt pro-growth policies. Anti-President Barack Obama is certainly a leading factor in their assessment as Obama refuses to consider reducing spending. Gold prices hit a new all-time high flirting with $1497 an ounce briefly. The Volatility Index, VIX, jumped 17% in just one day as markets scramble to find shelter.