Debt Downgrade part of Bigger Plan?

The debt downgrade of the U.S. debt has caused much calamity and confusion.  The stock market has sold off several hundred points since S&P took the action earlier this month.  Is it a big deal?  You bet, but it is not the immediate end of the line when talking about the U.S. Treasury market.  Brilliant economist Martin Armstrong recently said, “When you deal in REAL money, there is a problem. How do you store it? You can’t just put a billion on deposit at a bank. They will sell it every night and don’t have to tell you. If the REPO market blows up and you go to the bank and say I want my billion, they lost it, and so you turn to FDIC to collect your $100,000. Right! The ONLY way to park serious money is in treasuries. If you have hundreds of billions, now you have the added problem of MARKET SIZE. You can’t just go to any country. Their debt structure cannot provide the ability to park serious money. This is the difference from taking personal economics and applying it to the whole world. It doesn’t work! Don’t worry. Be happy! Until we revise the world monetary system and the dollar is no longer the RESERVE currency, sorry boys, but you are spinning scenarios that scare people, sound good as talking points, but are just gibberish in the real world of serious money.”

So if the Treasury market is the only game on the planet for huge money, why the downgrade?  Is it a political decision?  Is there some sort of plan to speed up the demise of the dollar as the reserve currency?  Could the correct answer be all of the above?  Guest writer Ellen Brown from explores these questions and so much more in her latest post.  Please enjoy. –Greg Hunter—


By Ellen Brown, Guest Writer for

What just happened in the stock market? Last week, the Dow Jones Industrial Average rose or fell by at least 400 points for four straight days, a stock market first.

The worst drop was on Monday, 8-8-11, when the Dow plunged 624 points. Monday was the first day of trading after US Treasury bonds were downgraded from AAA to AA+ by Standard and Poor’s.

But the roller coaster actually began on Tuesday, 8-2-11, the day after the last-minute deal to raise the U.S. debt ceiling — a deal that was supposed to avoid the downgrade that happened anyway five days later. The Dow changed directions for eight consecutive trading sessions after that, another first.

The volatility was unprecedented, leaving analysts at a loss to explain it. High frequency program trading no doubt added to the wild swings, but why the daily reversals? Why didn’t the market head down and just keep going, as it did in September 2008?

The plunge on 8-8-11 was the worst since 2008 and the sixth largest stock market crash ever. According to Der Spiegel, one of the most widely read periodicals in Europe:

Many economists have been pointing out that last week’s panic resembled the fear that swept financial markets after the collapse of US investment bank Lehman Brothers in September 2008.

Then as now, banks stopped lending each other money. Then as now, banks’ cash deposits at the central bank doubled within days.

On Tuesday, August 9, however, the market gained more points from its low than it lost on Monday. Why? A tug of war seemed to be going on between two titanic forces, one bent on crashing the market, the other on propping it up.

The Dubious S&P Downgrade

Many commentators questioned the validity of the downgrade that threatened to collapse the market. Dean Baker, co-director of the Center for Economic and Policy Research, said in a statement:

“The Treasury Department revealed that S&P’s decision was initially based on a $2 trillion error in accounting. However, even after this enormous error was corrected, S&P went ahead with the downgrade. This suggests that S&P had made the decision to downgrade independent of the evidence. [Emphasis added.]

Paul Krugman, writing in the New York Times, was also skeptical, stating:

[E]verything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs . . . .

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

In an illuminating expose posted on Firedoglake on August 5, Jane Hamsher concluded:

It’s becoming more and more obvious that Standard and Poor’s has a political agenda riding on the notion that the US is at risk of default on its debt based on some arbitrary limit to the debt-to-GDP ratio. There is no sound basis for that limit, or for S&P’s insistence on at least a $4 trillion down payment on debt reduction, any more than there is for the crackpot notion that a non-crazy US can be forced to default on its debt. . . .

It’s time the media and Congress started asking Standard and Poors what their political agenda is and whom it serves.

Who Drove the S&P Agenda?

Jason Schwarz shed light on this question in an article on Seeking Alpha titled “The Rise of Financial Terrorism”. He wrote:

[A]fter the market close on Friday August 5th, we received word that S&P CEO Deven Sharma had taken control of the ratings agency and personally led the push for a U.S. downgrade. There is a lot of evidence that he has deliberately tried to trash the U.S. economy. Even after discovering that the S&P debt calculations were off by $2 trillion, Sharma made the decision to go ahead with the unethical downgrade. This is a guy who was a key contributor at the 2009 Bilderberg Summit that organized 120 of the world’s richest men and women to push for an end to the dollar as the global reserve currency.

[T]hrough his writings on “competitive strategy” S&P CEO Sharma considers the United States the PROBLEM in today’s world, operating with what he implies is an unfair and reckless advantage. The brutal reality is that for “globalization” to succeed the United States must be torn asunder . . .

Also named by Schwarz as a suspect in the market manipulations was Michel Barnier, head of European Regulation. Barnier triggered an alarming 513-point drop in the Dow on August 4, when he blocked the plan of Hans Hoogervorst, newly appointed Chairman of the International Accounting Standards Board, to save Europe by adopting a new rule called IFRS 9. The rule would have eliminated mark-to-market accounting of sovereign debt from European bank balance sheets. Schwarz writes:

We all should be experts on the dangers of mark-to-market accounting after observing the U.S. banking crisis of 2008/2009 and the Great Depression in the 1930s. Mark-to-market was repealed at 8:45 a.m on April 2, 2009, which finally put a stop to the short term liquidity crisis and at the same time ushered in a stock market recovery. Banks no longer had to raise capital as long term stability was brought back to the system. The exact same scenario would have happened in 2011 Europe under Hoogervorst’s plan. Without the threat of failure by those banks who hold high amounts of euro sovereign debt, investors would be free to move on from the European crisis and the stock market could resume its fundamental course.

Schwarz notes that Barnier, like Sharma, was a confirmed attendee at past Bilderberger conferences. What, then, is the agenda of the Bilderbergers?

The One World Company

Daniel Estulin, noted expert on the Bilderbergers, describes that secretive globalist group as “a medium of bringing together financial institutions which are the world’s most powerful and most predatory financial interests.” Writing in June 2011, he said:

Bilderberg isn’t a secret society. . . . It’s a meeting of people who represent a certain ideology. . . . Not OWG [One World Government] or NWO [New World Order] as too many people mistakenly believe. Rather, the ideology is of a ONE WORLD COMPANY LIMITED.

It seems the Bilderbergers are less interested in governing the world than in owning the world. The “world company” was a term first used at a Bilderberger meeting in Canada in 1968 by George Ball, U.S. Undersecretary of State for Economic Affairs and a managing director of banking giants Lehman Brothers and Kuhn Loeb. The world company was to be a new form of colonialism, in which global assets would be acquired by economic rather than military coercion. The company would extend across national boundaries, aggressively engaging in mergers and acquisitions until the assets of the world were subsumed under one privately-owned corporation, with nation-states subservient to a private international central banking system.

Estulin continues:

The idea behind each and every Bilderberg meeting is to create what they themselves call THE ARISTOCRACY OF PURPOSE between European and North American elites on the best way to manage the planet. In other words, the creation of a global network of giant cartels, more powerful than any nation on Earth, destined to control the necessities of life of the rest of humanity.

. . . This explains what George Ball . . . said back in 1968, at a Bilderberg meeting in Canada: “Where does one find a legitimate base for the power of corporate management to make decisions that can profoundly affect the economic life of nations to whose governments they have only limited responsibility?”

That base of power was found in the private global banking system. Estulin goes on:

The problem with today’s system is that the world is run by monetary systems, not by national credit systems. . . . [Y]ou don’t want a monetary system to run the world. You want sovereign nation-states to have their own credit systems, which is the system of their currency. . . . [T]he possibility of productive, non-inflationary credit creation by the state, which is firmly stated in the US Constitution, was excluded by Maastricht [the Treaty of the European Union] as a method of determining economic and financial policy.

The world company acquires assets by preventing governments from issuing their own currencies and credit. Money is created instead by banks as loans at interest. The debts inexorably grow, since more money is always owed back than was created in the original loans. (For more on this, see here.) If currencies are not allowed to expand to meet increased costs and growth, the inevitable result is a wave of bankruptcies, foreclosures, and sales of assets at firesale prices. Sales to whom? To the “world company.”

Battle of the Titans

If that was the plan behind the market assaults on August 4 and August 8, however, it evidently failed. What turned the market around, according to Der Spiegel, was the European Central Bank, which saved the day by embarking on a program of buying Spanish and Italian bonds. Sidestepping the Maastricht Treaty, the ECB said it would engage in the equivalent of “quantitative easing,” purchasing bonds with money created with accounting entries on its books. It had done this earlier with Greek and Irish sovereign debt but had resisted doing it with Spanish and Italian bonds, which were much larger obligations. On Tuesday, August 16, the ECB announced that it was engaging in a record $32 billion bond-buying spree in an attempt to appease the markets and save the Eurozone from collapse.

Federal Reserve Chairman Ben Bernanke was also expected to come through with another round of quantitative easing, but his speech on August 9 made no mention of QE3. As blogger Jesse Livermore summarized the market’s response:

. . . [T]he markets sold off rather rapidly as no announcement was made about QE3. . . . It wasn’t until . . . the last 75 min of market activity [that] the DJIA gained 639 pts to close at a day high of 11,242. That begs the question, where did that injection of capital come from? The President’s Working Group on Financial Markets? Or did the “policy tools” to promote price stability by any chance include the next round of Quantitative Easing unannounced?

Was that QE3 Incognito, Ben?

Titanic Battle or Insider Trading?

There could be another explanation for the suspicious downgrade that was announced despite the fact that the government had just made major concessions to avoid default, and despite the embarrassing revelation that S&P’s figures were off by $2 trillion. On August 12, MSN.Money reported that the downgrade “wasn’t much of a surprise”:

Wall Street had heard a rumor early on that the downgrade was coming. News sites reported the rumor all day.

Unless it was all a huge coincidence, it’s likely that someone in the know leaked the information. The questions are who and whether the leak led to early insider trading.

The Daily Mail had the story of someone placing an $850 million bet in the futures market on the prospects of a US debt downgrade:

The latest bet was made on July 21 on trades of 5,370 ten-year Treasury futures and 3,100 Treasury bond futures, reported ETF Daily News.

Now the investor’s gamble seems to have paid off after Standard and Poor’s issued a credit rating downgrade from AAA to AA+ last Friday.

Whoever it is stands to earn a 1,000 per cent return on their money, with the expectation that interest rates will be going up after the downgrade.

The Securities Exchange Commission announced on August 8 that it is investigating the downgrade. According to the Financial Times, the move is part of a preliminary examination into potential insider trading.

Whatever was going on in the market in the first two weeks of August, it was unprecedented, unnatural, and bears close observation.


Ellen Brown is president of the Public Banking Institute and the author of eleven books. She developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, she turns those skills to an analysis of the Federal Reserve and “the money trust.” Her websites are and

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  1. MasterLuke

    Its total smoke and mirrors. Blame the U.S. for its reckless nature. The question is who controls the U.S. Is it in their interest to maintain a strong middle class/family orienated society? Or is it in their interests to divide and conquerer and own everyone?

    The same people that blame the U.S. are the same people that pull the politicians strings and cause this reckless abandonment. There are some people who base security with a monetary value. This is to say that the more money they have the more they feel secure. This is the same principle with owning everything and its a selfesh interest.

  2. Mitch Bupp

    Thanks, Ellen and Greg, This is the “company’s plan” and this is why the US founding fathers limited corporations in scope; size and limited their life because their experience with the East Indian Trading Company and the corrupt British monarchy. It has taken a mere 240 years for the stealth over throw of US democracy that eliminated the “world company” as the economic slave masters until the coup called the Federal Reserve Act of 1913.

    This conspiracy is real and the problem is that most won’t see it because it is so big and so far reaching that it is beyond the ability of most to comprehend.

    • Greg

      Thank you Mitch.

  3. Sarkis

    How on earth can Bernanke bring QE3 when gold is nearly at $2,000?

    This Friday will be interesting.

  4. Stief Bijer

    Sadly, this article misses the key point–almost all governments AND super-rich Bildenberg banksters are trying to control-own ordinary people = you and I.

    Please, Ellen, don’t tell us how “nice” governments are compared to the “big, bad banksters.” They are both dangerous power-psycho’s.

    > corrupt, greedy, power-crazy government$ with guns
    > corrupt, greedy, power-crazy mega-crook$ with pens

    Please remember the ancient Indian saying, “When elephants fight, the grass always loses and suffers.”

    Teach us how to navigate, outwit and escape from these raging elephants–Big Governments and Big Corporations alike.

    So far, I have only found a few people who can wisely guide me in the short+long-run through these chaotic times–Richard Maybury, historian, economist and financial advisor is my current favorite.

    Why not help all of us people, Ellen, to liberate ourselves as much as possible? Why are political masters of war better for us than financial masters of money?

  5. M SMITH

    Greg, as you know I have pointed to Martin Armstrong’s work often on your site. If folks have not read his bio they are missing why his work is so important in understanding how the world works. It also shows what has happen to the rule of law right here in the USA. As Americans we have lost our way by design. A well planned process that has been evolving over time as we go along our lives as all was well when it was not. Our lives have been turn up side down because the rule of Law & the Constitution has been trashed for the political right & left own follies. A nation the world once looked up to, is no longer that shining light of hope.

    What comes next will be ugly. Martin’s release of ‘Rise & Fall of the Euro” is a long piece but well worth the time, it adds on to what you have presented to us today. Like Martin said,would you go to a dentist for treatment of cancer?!

    I would like add one more thought, Ron Paul has been true to his word as long as he has been in congress, I would hope that Dr Paul would ask Martin to be on his team as head of Economics, Monetary Policy, and any other form of experience’s Martin has to offer, as he runs for office of president! Ron Paul has been the only man to stick to his word while in congress. He would tell Americans the truth that it will be painful to restore our Republic to a place where freedom is not free & Martin would be a asset to help Ron Paul get through to the people of all back grounds. Then all the attacks that will come from all sides & ‘IT WILL’! Martin understands how the world works & together who knows what a difference they could do for not only Americans, but people all over the world.

    This is asking a lot from a man who has been treated worse than any terrorist by his own Nation & the courts, yet I hope and pray for them both to some how be brought together for this common cause, a good, noble cause like our Founders saw and follow up on it. Our Nation was born out of those efforts.

    • Greg

      Thank you M Smith for the comment and link on Armstrong.

  6. Jerry

    Can you smell the stench? Just follow the yellow brick road all the way through the IMF, the Federal Reserve Bank, (Bilderberg attendees will show the the way)etc. Finally you end up at the global monetary mafia headquarters known as Bank of London and the money masters will be at the house of Rothschild.

  7. Andy

    Stopped reading when you cited Paul Krugman as someone who might have some sort of non-biased insight on the S&P action, when he’s made it abundantly clear over the years that it’s a position he takes on principle, rather than as a result of study, or even glancing at reality.

    Greg: I’m an avid reader, not sure why you’d let this be posted here. Please do a better job vetting your guest posters.

    • Greg

      I am no fan of Paul Krugman either. I do not know how he won a Nobel Prize but because he’s mentioned in an article does not invalidate the entire article. I try to put up multiple points of view on a subject. You have to admit the timing of the downgrade was suspect. By S and P’s logic we should have had our debt downgraded long ago, so why now. This is not an accident or coincidence I think it will speed the demise of the U.S. dollar and folks need information from all sides to gain knowledge to protect themselves. If you are an avid reader, then you know I will put on comments on even if they totally disagree with some of the content here. Ellen Brown makes some valid points and brings up some important questions about the timing of U.S. debt downgrade. Thank you for your comment, criticism and most of all support..

  8. snooker75

    Ok….. So I know everyone gets all excited about the big “2 trillion dollar error” but looking even at the release treasury put out to “explain” itself, it still looks an awful lot to me like even under the “correct” scenario, US Debt-to-GDP increases from 60% to 80% over the next 10 years…. And that’s WITH the “fixes” AND with incredibly rosy economic scenarios that its pretty clear are pure fantasy. What the hell Greg, why are you publishing this garbage?

    I assumed you’d already seen it, but take a look at the administrations charts yourself here

  9. omid

    S&P action unethical? Are you kidding? It is 10-20 yrs late. Maybe this Sharma person did it via an agenda, but to say the way world banking and economics works should be left as is is grossly unethical to all hard working world citizens and savers! Big picture, we’re all screwed in the West anyhow, so this person just spurred us to open our eyes to the future volatility that will surely be worse than 2008!

  10. NCdirtdigger

    The S&P downgrade speaks to the value of the currency to be returned to investors, when compared to the value of currency initially invested.

  11. joe

    Personally, I have always believed that big government AND bankers are corrupt. Another good example of their collusion is home mortgage interest write-offs on taxes. Once upon a time, a home mortgage term lasted (at most) seven years. Now we have interest only loans where banks own the homes AND get paid the interest. What incentive does one have to actually work to pay off their home with that philosophy? This is one of the big ways in which the banks are the masters and we are the servants. My parents and my parents-in-law looked at my wife and I like we were crazy when we told them we wanted to pay off our home. The alternative is taking the money, throwing it at the rigged stock market, and having absolutely nothing to show for it then.

    To be honest, if I had to choose between paying interest (with tax write-off) to a bank or just paying taxes to uncle sam, I would choose taxes to the uncle sam. Both are corrupt, but bankers are cunningly so.

    • Greg

      Good stuff Joe!

  12. joe


    I don’t know if you’ve heard of Adrian Douglas at Market Force Analysis, but he has some really good stuff out there on the manipulation of PMs by the central banks and government, fiat currency, and other interesting articles on economics in general. I wish I had access to it before taking economic in college as econ would have made more sense at the time. His articles basically document the timeline for the rise of gold and silver over the past decade. Fascinating stuff…


    • Greg

      Thank you Joe.

  13. Saq

    *sigh* I’m still trying to figure out if I should stop paying down my mortgage ( I have about 6 yrs left paying double payments) or should I go back to making just the payment and start buying gold and silver expecting the dollar to collapse.

    Thanks for the info Greg, I enjoy your newsletter.

    • Greg

      At this point you are at the narrow end of you loan providing it is a 30 year. Your principal payments are less than interest. So it would not hurt you all that bad to just go back to paying the mortgage alone. It you have 0 precious metals then you need some in your portfolio. I suggest gold and silver coins. I wrote a post about this called “How to Buy Gold and Silver.” It is under my picture on the home page. I do not sell gold or silver so I don’t care where you buy it.

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