21 Aug 2023
Published on: August 19, 2023 by RR7

Good News is Good News; Bad News is Good News; Very Bad News is Great News

I continue to see an amazing performance in the U.S. stock market. I’ve become absolutely convinced that the stock market’s ability to defy long-standing financial rules on the negative side is related to the rapture.

We are living in a strange world where the most dire news possible can be made to be a positive event for the financial markets. If it was announced that a large asteroid was headed for earth, the stock market would rally.

We recently had the credit rating agency Fitch downgrade the U.S. credit rating. Fitch cut the U.S. debt by one notch, from AAA to AA+, partly in response to how the federal government handled the debt crisis two months ago. That move mirrored a similar downgrade by S&P in 2011, also following a debt ceiling standoff in Congress.

I was surprised that Fitch was brave enough to cut the government’s debt rating. When S&P downgraded the U.S., the stock market went into a mini-crash, and gold shot to a new high. S&P found itself under scrutiny from a large portion of the national government. Since the firm had given a AAA rating to corporate bonds that crashed during the 2008-2009 financial crisis, Washington expects S&P to continue the lie with all federal debt.

Fitch likely made the decision to downgrade because it perceived that few people cared and reality would eventually set in. If the federal bond market goes into a meltdown, Fitch can claim the one-point lowering of our nation’s rating was somehow a warning of the coming calamity. A true measure of our debt risk would have bonds rated as junk.

There used to be a class of people who were called debt watchdogs. They would write books that warned how our spending was going to cause the death of the dollar. I have many of them in my book collection.

When the national debt reached $1 trillion on September 2, 1981, the debt Watchdogs started barking like crazy. They would be amazed to learn that the U.S. debt would reach $33 trillion in 2023. Today, our interest payment alone is projected to soon be $1 trillion. The dollar is not only still alive, but it remains the world’s reserve currency.

The Congressional Budget Office (CBO) has released a report that said the U.S. budget deficit will widen by $5 billion every single day for the next decade. It will soon rise by $7 billion, $10 billion, and $12 billion. The CBO has always been too low in its numbers because it doesn’t understand how debt compounds.

The U.S. Treasury Department recently shamed the CBO by announcing plans to borrow an “eye-popping” $1.85 trillion over the next six months, which is 40 to 50 percent higher than the Treasury’s last spending forecast made just two months ago. Years ago, this would be the type of news that would cost a party control of Congress and the Whitehouse. There are probably more people in America that can sing the Mexican national anthem than quote dollar figures for the current federal debt.

We have a huge banking crisis that has already created a dollar value loss that is greater than the banking crash of the Great Recession. By jacking up rates at the fastest pace in history, government bonds have become dangerous to own. U.S. banks would have a loss of $200 billion if they were forced to sell their U.S. bond holdings.

It is amazing that more banks have not collapsed from simple mismanagement. The bankruptcy of Silicon Valley Bank shows it was more concerned about diversity and transgender rights than it was about watching the bottom line.

Right now, foreign holdings of U.S. debt were approximately $7.5 trillion, accounting for around 28% of the total U.S. debt. When the monthly trade figures came out, the data used to be something that could move the Dow Jones up or down. The trade deficit has become so meaningless, most financial news outlets don’t even report the numbers.

Reports that show the two largest holders of our debt starting to sell their bonds have had no impact on awareness. The Fed can print up all the money required to patch a hole in a U.S. financial market. It can do nothing for a trade partner that says they don’t want dollars for products we sell you.

There is a growing list of financial milestones that, once reached in the past, have nearly always resulted in a stock market crash. Some strange magic is working to prevent these triggers from being set off. Because Jesus said he would come back at a time of peace and safety seems to be the only explanation for why we have the most resilient economy in our nation’s history.

“For when they shall say, Peace and safety; then sudden destruction cometh upon them, as travail upon a woman with child; and they shall not escape” (1 Thessalonians 5:3).

–Todd