Why Politicians Are Good for Gold
BY JULIAN PHILLIPS
After a long and lengthening political debacle on both sides of the Atlantic, the developed world remains embedded in a crisis that the political systems are unable, or unwilling, to resolve despite all the hopeful talks. The leaders of the developed world are capable, competent men who have what it takes to surmount the debt crises that are consuming confidence day by day. So why don’t they?
Fitch Ratings gave the United States until 2013 to come up with a “credible plan” to tackle its ballooning budget deficit or risk a downgrade of the country’s coveted, AAA rating. The ratings agency revised the outlook from stable to negative on the U.S. credit rating after a special congressional committee failed last week to agree on at least $1.2 trillion in deficit-reduction measures. The committee failure made it unlikely that any meaningful deficit plan will be adopted next year, increasing the fiscal burden on the next administration that will be elected in late 2012, Fitch said. Fitch said the chance of a downgrade is “slightly greater than 50%”.
With unemployment still hovering close to 9.0%, it is likely that Federal Reserve policymakers will consider further monetary stimulus in an effort to give growth some support and to lower the risk of another US recession. While it may appear to be capable of stimulating growth, it will decrease the value of the U.S. dollar both internally and internationally.