Let's start with whose fault it is not: S&P.

To recap:

• S&P warned early in the year that there was a risk of a downgrade.
  
  
• S&P, when the debate was entered in May, said that they needed to see $4 trillion in actual deficit reduction and that this was a "down payment" on the problem, not the entire solution (they're right, incidentally.)
  
  
• S&P then re-iterated the warning when the debate got contentious.

That's (at least) three separate warnings that were intentionally ignored.  S&P was not ambiguous nor did they blindside anyone.  They told the government exactly what they needed to see and when in order to avoid the downgrade.  They're blameless.

So who's to blame?

• CONgress, for it's willing refusal to either clearly state that it didn't care if the downgrade happened or complying with S&Ps demands. Pick one.  When you have a firm saying "do X or we do Y", and that's a legal act, you either do X or you expect Y.  It is the height of arrogance to try to shine someone on like this - yet Congress did - on both sides of the aisle.  If you're in Congress and you're "offended" or "surprised" by this action, STFU.  You have no right to complain - you knew exactly what you had to do in order to avoid it, and you failed.  Eat your (rotten) peas.
  
  
• President Obama, for his belief that he could simply bully an independent business into not doing a lawful thing.  Again, he is a President, not a King.  Go back to Chicago Obama where you belong, and where "kneecap politics" are the way of the world.  Illinois deserves you.  Once again, eat your own damn peas.  You too knew exactly what you had to do as a leader to avoid the downgrade, and you failed.
  
  
• We the people, for our refusal to accept that we cannot have services from our government we refuse to pay for in the present tense.  This is a fact, whether we like it or not. Our incessant demands for that which we refuse to pay for do not make those goods and services magically appear forever.  We are acting like spoiled little brats and deserve the spanking we are receiving this evening (and over the last two weeks) in our 401ks and IRAs.  Worse, the damage tonight is a "love tap" - the belt of cold hard economic reality, applied with extreme vengeance, is headed toward our butts if we don't cut our behavior out right now.

We have all squandered the three years of forbearance we received after the 2008/09 crash.  Instead of doing the right thing we did the wrong thing.  Instead of closing bankrupt institutions we turned formal accounting fraud ("mark to myth") into a legal and accepted practice.  Instead of accepting that we had a bloated Federal government that was not being funded with tax revenues we insisted on "more free cheese" to "help people" without any means to pay for it.  We listened to people like Biden and Obama who claimed we had to "stimulate" the economy, when in fact we'd been deficit spending to the tune of about $500 billion every year since 2003.  In other words we were already massively distorting the economy - and in no small part that was why we had a housing bubble.  Our nation is addicted to debt and we're all in denial. 

We must either face our addiction and break it or it will break us.

Never mind the "supply side" delusion.  Oh sure, it sounds good.  It even looks good - initially.  But explain to me this - if you're a supply-sider, then how come the debt addition and GDP addition chart, if it works to produce sustainable economic growth, looks like this?

There's the outcome of "supply side" economics: It's a scam and a fraud - the math always shows exactly what you did, no matter what you claim happened.

Here's the question before us tonight folks: Are we ready to accept reality?

While the markets are down a good bit, they opened down much more.  The rebound has been reasonably impressive.  But it can all disappear - and a lot more - by morning.  It will too, if not tomorrow then in the coming weeks and months if we don't cut the crap.

You've already seen your 401ks and IRAs get trashed.  The next time it will not bounce by 100% in 18 months - it will go down and stay down because we already played all the "new fraud" cards to create the pop we have just "enjoyed."  This time there is no ability to bail out the banks - irrespective of political will.  We either do the right thing - now - or events will overtake us in a disorderly fashion.

The G7 and ECB statements today were quite weak.  Oh sure, the Fed and the rest of the Central Banks will point their "bazookas" at the "evil speculators" and blast away with more liquidity (debt) in the firehose.  But there's no meaningful uptake.

The credit report last Friday was especially alarming.  It showed, for the first time in a long time, an uptick in credit card debt.  This would be thought of as good rather than bad except that the consumer income and spending were down.

So we have consumers who are not getting more money and not spending it - they're shifting spending to add more debt and it is reasonable to assume that this shift is forced rather than voluntary.

That's very bad folks.

As I have said a few times of late I do not think it's September of 2008 - yet.  I think the analogue is more like Bear Stearns' time.  This means we still have some months left before the various governments point their mighty bazookas (the most-powerful of which is simply their mouths) at the market and get a "click" rather than a "whoosh!" and "boom!"

But that day is coming folks - make no mistake.  I see no evidence from either political party in the Sunday shows today that either accepts what happened and why - nor any responsibility.  Instead we have everyone pointing fingers claiming the "other guy" did it.

Well, go back and read the top of this Ticker.  The terms for avoiding the downgrade were clear, they were published, they were consistent, and they were given with four to six months of warning, reiterated several times.  Congress and President Obama both gave the finger to S&P.

That's fine - but they gave the finger back, and they had every right to do so on the objective facts.

We either face facts and fix what's broken or we will have another Lehman 2008 moment, and much sooner than you think.

Since I do not believe the infestation in Washington DC are capable of acting like adults, as demonstrated by the fact that they just proved their inability for the entire world to see, I suggest that you be prepared for what is, in my opinion, the inevitable outcome.