So, here's the first piece of news. Fannie Mae and Freddie Mac, the two poisonous creations of the US gubment that buy property-related debt instruments and offer loans to people and businesses to buy homes and start businesses, have also been downgraded by S&P, but, as expected, they are not increasing their own rates for loans. Why?

http://finance.yahoo.com/news/What-the-debt-downgrades-mean-cnnm-3836355023.html?x=0
 
...Because Fannie and Freddie are driven by POLITICAL incentives, not financial.They are always backed by the US government.

Next. The Fed today announced that it would keep its prime lending rate LOW for the next two years. But we were told that interest rates would skyrocket if the US defaulted or was downgraded by an entity like S&P...

As we mentioned in our audio (refer to the show featuring Gard and Furb, from the 4th of August, 2011), there was NO WAY the Fed was going to raise interest rates. Why? For two reasons. First, they are still trying to pump the economy with a bunch of make-believe money. They think this will improve your bottom line, rather than increase the costs of everything you want to get while also causing malinvestment with the loose cash. (See the Austrian school of economics for explanations of this.  Thinking by the likes of Mises, Rothbard, etc.) Second, the US gubment is dependent on the Fed for the purchase of its worthless treasury bills. This year, 70% of all US debt has been bought, not by private investors looking for a 'safe haven -- laugh! -- and not by the "evil" Chinese (they are buying GOLD instead) -- it's been bought by, yeah, you got it, Repo Man, THE FEDERAL RESERVE.

There is no way that the Fed will raise rates, because the US gubment has to borrow money from the fed to pay off the debt instruments it sells to the Fed.

Watch that pea as it moves from shell to shell. Keep watching now, keep watching... ;)

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