We touch on several topics in today's letter, but the main theme is the question of who is worse off financially speaking, the US or Europe. I have written extensively about the growing European debt crisis in recent weeks, which I considered much more important than the debt ceiling circus that played out in Washington in July. It is now obvious to even the man on the street that there is a debt crisis in Europe, of late including even Spain and Italy, with rumors swirling about France as well. A real solution is not yet in sight.
Yet the US has plenty of debt problems of its own, with a national debt of $14.4 trillion, by far the largest of any nation on the planet and a president who thinks that trillion-dollar annual budget deficits are no big deal. Thus, it is only natural for observers to ask which is in worse shape - Europe or America? I will give you my thoughts on the question as we go along today. In a nutshell, Europe is worse off today, but the US is not far behind and is gaining ground at warp speed, sadly.
Following that discussion, we will explore whether or not Ben Bernanke and the Fed are cooking up another round of quantitative easing (QE3), and if they are, when we might first hear about it. Think August 26 - I'll tell you why below. Next, I will give you my thoughts on gold, and specifically why I don't think most gold buyers today have any idea how much risk they are taking. I trust that my readers are not jumping into gold at today's nosebleed levels, but I will tell you why that might not be a good idea in any event.
Lastly, we revisit the issue of Standard & Poor's recent downgrade of US debt from AAA to AA+ when none of the other credit rating agencies felt so inclined. Could there have been some political motivation behind the S&P's unilateral move? Surely not - wink, wink. Did the S&P mean to send a message to Congress about cutting spending? Maybe. Or was the S&P just trying to salvage its tarnished reputation after rating subprime mortgages AAA in the years leading up to the financial crisis? It should be an interesting discussion.