Debt & Deficits

Anybody who thinks the U.S. is in a so-called recovery isn’t listening to economist John Williams. He expects a negative reaction to the U.S. dollar in the next 3 or 4 months leading up to the mid-May deadline for Congress to get the budget and debt ceiling under control. If they do not get their financial house in order by then he believes "it will be the end of the road....as they are not going to have another opportunity".

The price of gold, on a quarterly basis, is 86% correlated - yes, 86%! - to total government debt going back to 1975... and a shocking 98% over the past 15 years! [As such,] it would seem like a no-brainer investment thesis to buy gold... as a proxy for the not-otherwise-investable thesis that US total government debt will increase in the future. [But there is more - and it is disappointment for gold bugs - read on!]

[There is a major downside to] quantitative easing; it isn't free. There is a cost to the Fed's policy and the bill will be past due when the economy recovers and interest rates rise. Congress will then realize that the Federal Reserve System is the biggest financial black hole in the history of mankind [and that] the tab may be big enough to blow the Federal budget and plunge Washington into a new fiscal and political crisis. Words: 870

The “debt ceiling” has replaced the “fiscal cliff” as the new crisis of the month. The gargantuan debt of the U.S. which – as of this writing – stands at an astounding $16,450,981,484,618 is now slightly above our current national debt ceiling of $16.394 trillion and growing. Let’s take a closer look at what the debt ceiling is and why it is important. Words: 1020

Higher interest rates [are eventually coming and]... will substantially increase the annual interest costs, the deficit, and the required borrowing/printing. More deficits, more borrowing, more printing, and higher interest rates will cause a larger deficit and more borrowing and the cycle will repeat. [You have a choice as to what you do to protect your current and future standard of living and this article sts it all out.] Words: 595

Across Europe and the United States, millions go without work. Those who do work face a lifetime of crippling taxation to pay for the entitlements of their countrymen and the debts of their governments. Canada by contrast is strong. To stay that way, we must never repeat the mistakes of Europe and the United States and we must instead focus on what Canada has already done right. Words: 1320

The current move up over the past 4 years is being driven by the Fed's loose monetary policies (just as other global markets have been driven by their Central Banks). Most bulls believe the loose polices will stimulate enough consumer demand to lead to a significant U.S. economic recovery. We, however, continue to believe the debt - laden consumer, along with the still other unresolved debt burdens, will be a major drag on the U.S. economy, (we are convinced that the market will turn down and make a triple top at levels below the peaks made in 2000 and 2007 while we resume the secular bear market that started in 2000) and that will have negative affects on the global economy.

Why are so many politicians around the world declaring that the debt crisis is "over" when debt-to-GDP ratios all over the planet continue to skyrocket? The global economy has never seen anything like the sovereign debt bubble that we are experiencing today. This insanity will continue until a day of reckoning arrives and the system implodes. Nobody knows exactly when that moment will be reached, but without a doubt it is coming. Are you ready? Words: 1270

The U.S. debt situation when broken down to one of family statistics really seems absurd. Yet it's true. It's a slow motion train wreck that can be seen coming miles away but which, like deer paralyzed in the headlights, everyone is unwilling to face up to and to take any meaningful corrective action - and it will be the downfall of them all. Words: 550

If Congress does not raise the debt ceiling, the result will be no different than the Jones family deciding that they have maxed out their credit cards and that, if they continue borrowing and spending over their means, there will be significant pain to the family at best and bankruptcy at worst. Any attempt to prove otherwise is futile because it's just not true! [To further make his point the author provides below 7 other examples of why the economics of government are no different than those of the typical American household.] Words: 585