America saw another downgrade on its credit rating last week. The White House ordered the press to keep quiet and they meekly obeyed. But that’s not the worst problem. If the Big Three follow through on the downgrade, prices of all commodities, including gold, silver, and oil, could rise sharply.

Credit rating action

Egan-Jones Ratings Company (EJR) is an independent credit rating company that answers only to investors. No company or government that issues commercial or sovereign debt has any influence over its decisions. A source familiar with such matters (specifically an account executive for a major precious-metals brokerage firm) pointed out to CNAV that the Big Three credit rating agencies (Standard and Poor, Moody, and Fitch) all work under such influence. Therefore, if any country’s sovereign debt deserves a downgrade, Egan-Jones will downgrade it first. The Big Three will follow Egan-Jones’ lead when they can no longer deny the reality.

In 2008, Egan-Jones was first to predict the crash of the housing market. Last year, they were the first to downgrade the American credit rating from AAA to AA+. Standard and Poor merely followed Egan-Jones’ lead.

The Marriner S. Eccles Federal Reserve Board Building. Photo: User Cliff1066/Flickr, CC BY 2.0 Generic License

On Thursday, 5 April, Egan-Jones Ratings downgraded American sovereign debt again. The American credit rating is now AA.

Egan-Jones will not normally share its reports with anyone other than a client. But they did speak to Reuters News Service. Richard Leong reports that Egan-Jones acted as they did because the Congressional “super-committee” had failed its mission.

Without some structural changes soon, restoring credit quality will become increasingly difficult.

In other words, if the United States government wants its AAA credit rating back, it must change the amount of money it spends, and fast.

Egan-Jones accused the Federal Reserve of “monetizing the debt.” It also said that the Federal Reserve might lower interest rates by so doing, but eventually that would fail, too.

Press inaction

The mainstream press, aside from this report in Business Week, have said nothing about this downgrade. And the European Union Times scathingly paraphrased RIA Novosti as saying that the American press

has become nothing more than a propaganda arm of the Obama regime when during a White House news briefing this past week they were effectively ordered not to report on this past weeks credit rating cut of US government debt.

Alternative-media columnist Allen Roland said flatly that

the United States is in a deep depression.

Roland gave these details:

Reality is finally coming to the surface. The stock market is not the American economy. Eighty percent of the stock market is basically high frequency trading of the big boys playing games with their money.

And 61 percent of the American debt is being bought by, guess who? The Fed (US Federal Reserve Bank) – So we’re printing money. So let me give you the raw economic numbers, which basically what this is telling us – raw economic numbers about the American economy.

38 percent of all Americans are either considered to be low income or living in poverty; 57 percent of all children in the US are living in homes that are either considered to be low income or impoverished; the average amount of time a worker stays employed in the US is now over 40 weeks and according to the Bureau of Labor Statistics, 16.6 million Americans were self-employed in 2006; today that number is 14.5 million.

So, we are still in the midst of a depression. The administration is doing everything it can do to paint a rosy picture, but has nothing to fall back on.

CNAV‘s gold-and-silver source sounded a more immediate warning:

The last time Egan-Jones [lowered the US credit rating], gold shot up $100 an ounce. We could see that again.

Obviously all commodities could follow the lead of gold and other precious metals.

Senator Kent Conrad (D-ND) said yesterday that he does not expect the Senate to pass a budget until after the election. Now that Egan-Jones has sounded its warning, that might be far too late.