Late Friday evening, Standard and Poor's was the first US credit ratings agency to actually whisper that, possibly, the emperor has no clothes.

The emperor, in fact, has been standing there naked for years. All one has to do is look at the growth in US Government debt and that fact is clear.

There aren't many charts that look like that in finance - or nature - that don't end in something dramatic happening... like an explosion... or extinction.

But, just the fact that one of the US credit ratings agencies who also thought Sub-Prime debt was fine - until it wasn't - thinks that there might be a problem with US Government finances isn't really big news. Stating the obvious should never be such a big deal. But, as George Orwell said, "During times of universal deceit, telling the truth becomes a revolutionary act."

If the response by the Federal Reserve, European Central Bank and the G-7 is any indication, S&P's downgrade is a revolutionary act.

Within minutes of the announcement the Federal Reserve held a news conference at 9:30pm Eastern to calm the markets. Then, over the weekend, the European Central Bank also tried to assuage fears about Italy and Spain. And, finally, the G7 came forth with the most strongly worded statement. They stated that they will take "every action" to "stabilize" global markets.

That is quite a statement. Every action? To stabilize the markets of the world? The Plunge Protection Team has gone global.

Gold registered its verdict quickly. It opened up $30 Monday morning in Asia and nearly surpassed $1,700. Gold is now within $20 of overtaking Platinum.

Risk-Free is Dead

What many don't understand is that this entire western financial system is a completely artificial, non free-market system. If it was a free-market, the Federal Reserve wouldn't exist.

The whole financial infrastructure constructed over the last century all has one big, gaping fallacy at the heart of it: the entire edifice is based on US Government debt - Treasury bonds - and the idea that these scraps of paper are "risk free".

Nary a bigger lie has ever been told. Of course, if you are so foolish as to think the US dollar never depreciates and that it will always exist then you could fall for the trick.

This is the set-up. They say that a 30 year Treasury bond with a nominal value of $1 million will be paid back in 30 years with $1 million. And this, actually, is true. The rub is, however, that what you can buy for $1 million today looks nothing like what you can buy in 2041 for $1 million. Today you can buy a very nice house almost anywhere in the world for $1 million. In 2041, your $1 million will just get you confused looks and people looking on the internet to see what a "US Federal Reserve Note" is. You might get "something" for it, but it likely won't be much... maybe enough to buy a sandwich at The Museum of Fiat Currencies.

Yet, this is what is the foundation of the entire system. The lie that Treasury Bonds are "risk free" because, when worse comes to worst, Helicopter Ben can always print up more Federal Reserve Notes to give you back your money.

That is why what happened Friday sent reverberations throughout the entire world's financial structure. Nothing fundamentally changed. The US Government has been broke for a while. The US dollar has been headed towards worthlessness since 1971. But, just by someone from within the financial structure actually saying that maybe everything isn't as it seems, it shocked the world.

It's because, at this point, as Ben Bernanke has repeatedly stated, it's just a con-game. It's only about confidence. He has repeatedly stated that confidence is critical. The entire system is bankrupt. But, as long as no one says it is, then maybe they can keep the game going.

What Are the Repercussions of the S&P Announcement

The announcement, in and of itself, may not have any great effects.

However, this may mark the beginning of the end for the system. It certainly, almost unquestionably, marks the end of the 30 year bond bull market. That would have happened with or without the announcement but now that someone has finally flinched it will likely lead to a cascading effect as more people worldwide realize the jig is up.

Risk-free was always a ruse. But, now, Treasury Bonds become risk-certain. Those who believed in risk-free will find out that it was the riskiest place of all.

Hold on to your hats.