Things got pretty tense the last week of July with the possibility of US defaulting on its debt were Washington not been able to reach a compromise in raising the debt ceiling. The day before default was scheduled to kick in, the President signed a compromise bill.
With the US debt default now old news and the debt issue still at the forefront of people's minds, the focus returned to Italy. It became clearer than ever that the world was no longer pregnant with a piggy but had given birth to a real big piggI to add to the family of PIGS countries. Not to be outdone, the US reclaimed its notoriety with S&P's downgrade of the US debt last Friday, followed by more downgrades yesterday of the Federal Home Loan Banks, Fannie Mae and Freddie Mac.
The Dow summarized the events well: from Monday, July 25 to Monday, August 8, the Dow's close went down from 12,593 to 10,810, a 1,783 point or 14% drop.
Today, Tuesday, the markets are recovering somewhat. It is a welcomed relief. I wish the upward trend would continue although volatility will likely be the norm.
Until I see a cure, I am going to adhere to my doom and gloom prediction based on my analysis. For some time, the world will still ride the tide of happy thoughts based on false hopes, petty greed and flat denials. One day, and that day will be here sooner than most would expect, the US dollar will show its real worth and that day will not be pretty.
On the US dollar bill are printed these very words: Federal Reserve Note. Between the last two words, it is more appropriate now than ever to insert "Promissory" for the Federal Reserve Note is truly a debt. The only question left is what percentage is debt and what percentage is worth.
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