Brace Yourself for Next Week’s Debt Downgrade
by Louis Basenese, Investment U Contributing Editor
Tuesday, November 22, 2011: Issue #1468
Congress desperately needs to be saved from, well, itself!
In a moment, I’m going to ask you to visit our brand-new “emergency measures” website, www.SaveCongressFromItself.org, where we just uploaded a new report.
The report details a secret strategy our Forefathers left behind for Americans to use as a last resort. It may represent our last lifeline!
But first, let me explain why our personal livelihoods could radically change – for the worse – as early as next week.
As you’re probably aware, Congress failed again to pass a budget for the Fiscal Year, choosing instead to operate under a series of stop-gap funding measures. Its Ethics Committees sure keeps busy, though, routinely investigating members for a plethora of improprieties.
Clearly our elected mis-representatives have their priorities backwards. It’s no wonder a late-October poll shows their approval rating hit an all-time low of nine percent.
But Congress’ ineptitude may soon have much greater consequences for Americans than most people realize. As in another debt downgrade, which would spell doom for the economy and the stock market.
At the crux of the situation is Congress’ mutually hopeless “Super Committee” – you remember, that new “bipartisan” House-Senate panel charged with finding $1.2 trillion in deficit cuts over a decade.
The Super Committee has until tomorrow to report its proposal. Or suffer the consequences.
Doomed By Design
Before I get to the solutions, let me back up a bit and show you in the simplest terms possible what’s going on… why I’m so concerned… and what could happen within days…
You see, when Standard & Poor’s downgraded the United States’ AAA credit rating this past summer, it also sent an ominous warning…
…that the joint committee better make progress toward achieving its goal of stabilizing the debt, or else.
There’s a big problem, though. With the deficit panel equally divided between Republican and Democratic members, gridlock is (once again) in the offing.
The Super Committee is operating under a veil of intense secrecy, but a senior Democratic aide has already spilled the beans, saying, “The likely outcome is no agreement will be reached.”
Surprised? Hardly! But here’s where it gets scary…
Failure to reach an agreement would not only erode what little confidence remains in our federal government, but would also trigger a budget sequester. Or in layman’s terms, automatic, across-the-board spending cuts… to defense and domestic programs, specifically.
And such a turn of events would be crippling.
For instance, it would shrink our Navy to the smallest number of ships since 1915. It would reduce our Air Force to its smallest size ever. And it would cut Medicare benefits by $123 billion.
Sequestration would also likely trigger a second debt downgrade – this time, from either Moody’s or Fitch – dealing another blow to America’s already fragile economy.
Worse yet, it could send the stock market into a death spiral.
Such a reality has the potential to erase billions in personal wealth, indiscriminately crushing stocks, ETFs, 401(k)s, mutual funds and pension funds (i.e. – our hard-earned nest eggs).
But it gets even worse…
Even if the Super Committee agrees to a workable solution (highly unlikely), if the structure of the spending cuts and new taxes aren’t just right, it could result in economic contraction, which itself could trigger another debt downgrade and further thwart GDP growth.
So you see? We’re hosed either way!
Our Forefathers Saw This Coming
Having just fought the Revolutionary War to gain independence from Britain, the Framers of the U.S. Constitution knew, firsthand, that over time, the government itself can become the plague.
Or as Lawrence Lessig says in his book, Republic Lost…
“Sometimes an institution becomes too sick to fix itself. Not that the institution is necessarily blind to its own sickness. But that it doesn’t have the capacity, or will, to do anything about it.”
Understanding this, the Framers added to our Constitution an ingenious escape hatch.
Although it’s never been used in the history of this proud country, it’s the only plausible strategy for forcing fundamental reform to our Congress.
We’re calling it “The Framers’ Secret Resolution.”
Again, our Forefathers bequeathed this gift upon us in case of an emergency. We now have a fundamental responsibility to use it, right?
Please navigate to www.SaveCongressFromItself.org and download the full report, titled…
Save Congress From Itself: The Framers’ Secret Resolution.
In it, you’ll find every detail regarding our Forefathers’ brilliant strategy.
As you’ll learn in the report, the Framers intended this to be a very grass roots effort. So raising public awareness may be our only way to save the country.
Good investing,
Louis Basenese
Article by Investment U