Something - someone, some group.... however you want to define them... Bilderberg, Pimco, the Chinese, the Pentagon... maybe all of the above - very powerful "motivated" S & P to make this decision and announcement now. There are NO COINCIDENCES. And not that it isn't the right thing to do... it is. But it ain't a coincidence.
So what are the ramifications? I believe (at least for the moment, and reserve the right to change my mind) that this incident was designed to prod the parties along. And if I am correct, this is what comes to my mind:
- Any hint of success at cutting spending will send commodities down, perhaps hard. Commercial real estate and housing, too... though perhaps not as hard from here as commodities. Bonds might surprise you with interest rates heading lower and bond prices higher. Stocks not so much.
- A real cut in government spending would mean that deflation and recession would be in the offing - and that's a good thing. In this case its the cure that is far more preferable to the disease. (Americans would start to save and invest rather than consume and go into debt.) Can the economically and mathematically challenged members of the Left get it and cooperate without causing a political or constitutional crisis? I have my doubts. Can the people making bizzilions on pentagon and weapons programs accept the new reality without causing their form of mischief? I have my doubts there, as well.
- Any cut in entitlements and military spending would be an incredible move in the right direction, but a meaningful cut will be necessary to bring confidence back to the system. Should this happen, the U.S. would be giving itself its best opportunity to deal with Peak Oil, but it would be very painful for an electorate that has come to view something for nothing as a natural law of the universe.
- This would also likely be the beginning of an incredible contraction in the financial services industry - and that's a good thing, too. That industry has been far more destructive of the average American than gambling, Las Vegas hookers, illicit drugs, and McDonald's combined (and 3 of those 4 are illegal). The industry encouraged self-destructive consumption and debt, in the extreme, with its easy money loans and services. What does America have to show for all of that "Financial Service"? Cookie cutter McMansions and shiny Cadillac Escalades complete with spinning hubs (machine gun turrets are extra) that consume dwindling Oil supplies like mad but do pollute like crazy... so they got that going for them...