I’m writing on a plane (Friday morning) with no internet resources, so this will be a “pure” article. I wish it were about a more pleasant topic, but I am mandated to speak of REALITY; and sadly, global economic reality is as dismal as at any time in lives, with ZERO chance of improving until the root cause – FIAT MONEY – is destroyed. And FYI, I was just informed drinks are NO LONGER FREE on Frontier Airlines! Yes, for the first time EVER, I have been told my formerly complimentary drink now costs $1.99. Not $2.00, mind you, but $1.99. So for those that still believe inflation is NOT a problem, I suggest you re-evaluate the costs structure of your own life.
Last November, I wrote of the impending breach of the U.S. “debt ceiling”; which at the time was $16.4 trillion. It has been $14.2 trillion until it was raised in August 2011, pending matching spending cuts that never occurred. A bipartisan “Super Committee” vehemently promised such cuts; but in the end, didn’t bring a single cent to the table. Instead, the oxymoronic Budget Control Act was passed to “kick the can” past the 2012 elections; and voila, the “fiscal cliff” debacle that ultimately yielded a measly $85 billion of 2013 spending cuts – compared to the $2.2 trillion of debt since incurred.
In “DEBT CEILING TO INFINITY,” I postulated the inevitability of it being removed altogether. After all, it’s a farce when one considers it has been raised 42 times since 1980, or more than once each year. As you can see, both “conservative” and “liberal” administrations have been equally guilty; and in fact, Ronald Reagan presided over a record 17 debt ceiling increases. In absolute terms, the “big winners” are George W. Bush – who raised it by $4 trillion in two terms; and Barack Obama – by an incredible $7 trillion in just one, not including what’s coming this month. Heck, he now claims he “won’t negotiate” with Congress on the issue; as if he was not only Commander-in-Chief, but Commander-in-Finance as well. Then again, he just told the G-20 attendees QE would be tapered; and yet, it WASN’T…
As fiat currency regimes are PONZI SCHEMES by definition, the trend would have occurred under any President – be it Ben Bernanke or Ron Paul. In other words, the debt pyramid MUST grow larger to prevent instantaneous collapse; and what President, Congressman, or Central banker would allow that to happen “on their watch?” None, of course, as politicians MUST be re-elected to maintain their lifestyle. Better to “kick the can” as far as possible, and pray the game of financial musical chairs ends when the “next guy” takes office.
By the way, it should be no surprise that the debt’s slope turned PARABOLIC after the financial system was permanently broken in 2008; and based on the diminishing returns of incremental debt, it will only steepen in the coming years. That is, until the entire, unwieldy edifice collapses of its own weight – either via monetary HYPERINFLATION or DEFAULT. It ALWAYS does, and this time will be no different; as at this point, it matters not if Jesus Christ or Superman is elected President or Fed Chairman. The financial “point of no return” was passed so long ago; and thus, it is no longer even visible in the rear-view mirror.
Anyhow, the $16.4 trillion debt ceiling enacted in August 2011 would have been breached in January 2013. However, in one of the most juvenile Congressional acts EVER, they “delayed” it until May 2013; in other words, allowing $300+ billion of debt to accrue without breaching the ceiling. Moreover, when the May deadline passed, the Treasury utilized the same “extraordinary measures” as in 2011 to delay the debt ceiling breach further. Of course, the fact that said measures must be paid back is conveniently ignored by the media; as the day a new ceiling is passed – or eliminated – the national debt will rise by roughly $300 billion. And don’t forget the accounting chicanery enabling this delay – like the payment of “dividends” from Fannie Mae and Freddie Mach I discussed last week.
This time around, Republicans are playing the same extortion game the minority party ALWAYS plays; in this case, threatening government “shutdown” – and refusal to pass a debt ceiling increase – if Obamacare is not repealed or defunded. As I wrote Friday, the odds are they will relent; lest they be blamed for catastrophic layoffs, entitlement cuts or Treasury default. Obama believes we are “not a banana republic” because we always pay our bills. However, when paid for with PRINTED MONEY via a de facto “DEBT CEILING TO INFINITY” policy, what’s the difference?
At this point, I don’t believe a debt ceiling elimination is in the cards in this, the 43rd such negotiation of the past 33 years. However, the number selected will undoubtedly render it impossible to become an issue in the 2014 mid-term elections – just as the “fiscal cliff” was purposely delayed beyond the 2012 Presidential election. And thus, it would appear a figure of at least $18 trillion is likely. FYI, when Obama became President in 2008, the national debt was barely $9 trillion; and thus, will at least double by the time he leaves office.
Remember, Treasury Secretary Lew last week decreed October 17th as the date all “extraordinary measures” will be exhausted to delay a debt ceiling breach. And thus, Congress has just over two weeks to raise or eliminate it – lest the Treasury defaults. Consequently, be prepared for incessant media attention until a deal is worked out; which can only be MASSIVELY bullish for PMs, no matter what the ultimate result. Inevitably, it WILL be raised to “infinity”; and thus, it’s just a matter of time before the ENTIRE FINANCIAL WORLD acknowledges it.
By the way, the same can be said for ALL the world’s fiat currency regimes; which are to say, EVERY ONE of them. Worldwide debt has only one way to go – STRAIGHT UP; and given gold and silver’s historic 100% correlation to debt ceilings, take a guess which direction they will be going. What the Cartel has done this year – in the face of such MASSIVELY bullish PM fundamentals – is truly awe-inspiring; with far-reaching consequences that will be felt for generations. Consequently, this is an once-in-a-lifetime opportunity to own gold and silver at massively subsidized prices; and thus, I strongly suggest you PROTECT YOURSELF, and do it NOW!