Friday , 19 April 2024

Goldrunner: Here’s My Take On All That Debt Ceiling Crap (+2K Views)

All of the crap about the debt ceiling on television is just crazy.  Here is my take on it.debt-ceiling

So writes Goldrunner in edited excerpts from his latest subscription newsletter* entitled “THE DEBT CEILING CIRCUS- PART 1”.

[This article is posted here, with permission, by  Lorimer Wilson, editor of and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Goldrunner goes on to say in further edited excerpts:

1)      It is sad that it is going on at all.  The average American has to budget his finances while politicians just spend and spend.  It is also sad to see politicians threaten Americans with things like cuts in Social Security that those same Americans paid into the system, but the government failed to fund.  In the end, all of the crap about the debt ceiling is really about plausible deniability, delivered as propaganda.  Threaten deflation and austerity to make a big scene, and force the people to demand the debt ceiling be raised.  This is all part of the “show deflation” at critical times when they want to print more aggressively with no blow back.

2)      The game plan is still to devalue the Dollar to devalue the debt.  In order to devalue the Dollar, huge numbers of Dollars must be printed.  Ironically, the only way that the Dollars can be printed is to increase the debt.  This really no different than how the Dollar was devalued in the early 30’s to end the deflation.

3)      The Fed keeps printing while saying “No more QE” and then “tapering”- more propaganda: more plausible deniability.  In reality they need to print very, very aggressively to stave off a deflationary depression.  They need to be able to say, “Oh, look how we struggled trying not to print too much.”

4)      How the price of Gold has traded simply makes no sense.  The approximate $600 move up in Gold to $1920 came on only $600 Billion of Dollar printing yet the Fed has printed much more than $600 Billion since the $1920 Gold top.  Thus, the fundamentals dictate that Gold should be vastly higher than $1920.  The markets buy all of the propaganda while the Fed Banks use the false pricing system, paper gold, to manage the Gold price.

The Deflation Scare into the 4th quarter of 2008 came during a time when practically everybody thought that the Dollar printing was over since the bank loan multiplier system was blown out.   Everybody saw deflation for the future yet the decline in the price of Gold and the DJIA was almost exactly like the late 70’s as we had laid out in mid-2007, describing the coming waterfall decline as the Fed moved to dollar printing via debt monetization.  Gold retraced almost exactly as expected, declining about 35% down to $680.

Today, the Fed is still printing via QE, and the DJIA still sits around all-time highs.  Nobody expects deflation, yet Gold has declined 38% in price during a period of massive demand for Real Gold.

No doubt that the price of Gold is being managed via paper gold supply, but the real question is “Why, so late in the cycle?”  

  • I still think it has to do with the timing of getting aggressive Euro printing going to protect the US Dollar via the Dollar Index, but that may have morphed into other issues such as
  • the pushing through of Obama care…[which is] a major push to create more government debt.  Don’t forget that in order to print Dollars, debt must be created – debt that must be explained to the American public……………plausible deniability.  With the Debt Ceiling coming in conjunction with Obama care, the American people are being bombarded with thoughts of deflation and austerity.  Just watch the fools on CNBC show all the graphs of the potential for Social Security, Pension, and Defense cuts- and the list goes on, and on.

5)      In reality, the demand for physical Gold, Silver, and commodities keeps rising.  With the additional QE since mid-2012, the price of Gold should now be around $3,000.  China keeps on picking up commodities and commodities-in-the-ground all over the world.

6)      Along with the price of Gold and Silver being managed lower via paper gold, the PM Stocks are at the mercy of the big funds who short them.  Many PM Companies are showing increased production and increased reserves, but the real issue for those PM Companies in this environment is cash flow.  Companies starve without sufficient cash.  The funds short the PM Stock, knowing that, and also knowing which PM companies will be dropped from different PM stock indices.  Those PM Companies with production create a good portion of their own cash flow, yet they are shorted anyhow This creates great potentials for much higher future PM Stock pricing once Gold rises aggressively, both in terms of earnings and in terms of reserve valuations.

7)      The timing of the Debt Ceiling fiasco was set right in October when investors are always nervous due to cyclical weakness, in fact, it butts right up to the end of the week before the key October Monday “crash date.”  No doubt, this wasn’t an accident.  It feeds the deflation mental craze. 

8)      I still believe:

  • the DJIA will trade down to the 10,000 to 12,000 range equivalent of the late 70’s correction while Gold, Silver, and the PM Stocks take flight vastly higher and that
  • the probability of the DJIA rocketing to new highs into a top on a debt ceiling agreement is high.  Of course, nobody knows, and the DJIA could start the run down from here.  Since the Funds are mostly the only owners of stock in the DJIA, I suspect that they will run the DJIA to new highs to bring in suckers to dump shares on during the frenzy.  Then, the major correction in the DJIA will take place.

9)      I think that it is funny to see all of the talk about “default” and how other countries might quit buying our debt.  We have already defaulted on our debt to the tune of 50 to 60% of the decline in the US Dollar via Dollar printing/ devaluation.  Other countries are not too willing to buy our debt, thus it has been reported that the Fed is now buying most of it with newly printed Dollars.

All of the Fed buying with new Dollars is what has held the US Bonds up, and rising, for years.  The Fed needs to keep interest rates down as long as they can.  If the Fed is going to increase the debt monetization, then it will be buying up most of our debt into the future.  In reality, most other countries are doing the same kind of shenanigans, though to a lesser extent- Global Competitive Currency Devaluations.  The propaganda just gets deeper, and deeper.  Do people really watch television and believe all of this crap?

10)  In the end, we remain in a Deflationary Depression which has morphed into a Stagflationary Depression via massive debt monetization Dollar printing.  There are only 2 ways out:

  • The first is for the Fed to quit printing to let everything collapse into a deflationary heap. 
  • The second is for the Fed to ramp up the printing to inflate away another 75% of the debt like in the early 30s. 

There are no other choices.  Do you think the Fed is going to quit printing?  I don’t see that we have anything to lose by increasing the debt ceiling.

The real sticking point appears to be this albatross called Obama Care.  In 2008, a big portion of the new printed and debt monetized Dollars went to the big Banks.  Now with Obama Care, it appears that a big chunk of the newly debt monetized Dollars will go to the big insurance companies.  It looks like they figure, “Well, we have to print the money to devalue so we might as pay off our buddies who got us, here.” 

[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]

Other insights from Goldrunner:

1. Goldrunner Dissects Realities of Gold Market Unlike Any Other

This article identifies and analyzes the realities that have been, and are, affecting the gold market unlike any other article you have ever read on the subject. Get truly informed to better understand what has happened and why and what the future holds for the price of gold and why. Read on and enjoy. Read More »

2. Goldrunner Offers Clarity On How Banking Realities Affect Gold Price

Frankly, I cannot see how one can distinguish the Fed from the European banking system and looking at things in this way provides a very different picture of the international landscape.  The Fed is dependent upon euro printing in order to ramp up dollar printing, yet they are both one and the same.  All of the GS boys running over to Europe after the Fed banks defaulted on the OTC derivatives takes on a new light in retrospect.  It was a family reunion! Read More »

Related Debt Ceiling Articles:

1. 10 Ominous Warnings Of What Will Happen IF There Is An Extended U.S. Debt Default

If the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous – and if the U.S. government is eventually forced to start delaying interest payments on U.S. debt (which could potentially happen as soon as November), that would be absolutely catastrophic. Read More »

Going over the debt ceiling would mean the US government legally can’t pay its bills and would default on the national debt. This would be catastrophic in ways that would make Lehman Bros look like a walk in the park. Read More »