It’s been quite an eventful week as events around the world unfolded in a negative light which saw global markets crash and see their worst weekly losses since 2008. The S& P showed a clear technical sell on Tuesday with the neckline of the right shoulder in a head and shoulders pattern being broken. The market then tried to capitulate but failed to break resistance confirming a new downtrend which led to a very ugly drop in markets the rest of the week. And then we had the downgrade after market close on US debt by S & P. Just what everyone needed. 


The markets reacted negatively to the US debt deal with nothing being resolved leading everyone in the world asking what is wrong with American politics? If nothing changes, we are all doomed. If political gridlock remains for the next decade with no change in fiscal policies then the proverbial ‘worst is certainly yet to come’. What makes this insanely frustrating for everyone in the world who is not in Washington is that it is clear to all that a dual pronged approach of increasing revenue and spending cuts is what the country needs to even start to right its debt problem. It also leaves us precariously close to one more downgrade from either Fitch of Moody’s setting everything in motion to have things spiral out of control. 


Add all this to the fact that Europe can’t keep their house in order long enough to go on summer vacation, we really do have a problem. 


What should have been a positive or at least a ‘none event’ has become a landmark sentiment changer as political gridlock and bipartisanship have led capital markets to lose faith in America’s government to find a real solution. The 2 trillion in cuts that were made to the deficit over the next 10 years in a last minute deal fall way short and do nothing to alleviate one of America’s biggest problems. The widening wealth gap that threatens to destroy the middle class in American and turn them into the working poor, all the while corporations continue to real in record profits. 


If the unexpected drop in markets after the debt deal was signed was not a big hint of a huge change in sentiment... then the S & P downgrading US debt to AA status should be another reminder of how close we are to going over a cliff. Real arguments can be made for inflation and deflation which I know sounds absurd but we have economic conditions for both going forward. Certainly when the debt bomb goes off, all we are going to hear about is inflation as the USD spirals into oblivion. Austerity measures taking place all around the world make the case for deflation. 

Beat the Market Stock Picks: Developed World Debt Crisis Accelerates...