Shutdown, Debt Ceiling Prompt A Gold Market Sell-Off And Rebound?
Here is the latest article on Seeking Alpha from Tim. He points out that the next few weeks will be very interesting and most likely lead to continued volatility in the conventional and precious metals markets.
Stick with Gold. In these chaotic times, it is the only investment that can make the following claim: “It will never be worth nothing.”
So true, Jed!
Just a note to Bob Moriarty related to comments he made on the Weekend Show which I have not had time to address until now:
First off, Bob, you stated that the “real debt” is something like 210 or 212 trillion dollars. That is a pretty bold statement and of course it is also categorically false. The “true” debt is the debt we know we owe. Nothing more and nothing less.
The debt is not the “estimate” of future spending based on plans or programs that may or may not ever come to fruition nor be paid out as first envisioned. The debt is not the cumulative list of potential expenditures. Now I don’t doubt your intelligence so I really have to question your agenda when you make preposterous comments about what the US owes its people and its creditors which do not align with what is fact.
We should build an assumption firstly that we will not be paying out more into eternity than the state can potentially raise in taxation or other revenues as a starter. Your view seems to be that somehow the government will drive the economy into a ditch so deep no recovery will be possible until seven generations have passed.
Unfunded liabilities in fact never need to be paid out. Every single social program including pensions, subsidies, food programs, medicare, military, welfare and education can be modified as time goes by to better match the collection of revenues against the expenses planned on being disbursed.
Nothing is fixed in stone. Not even current known debt which can be inflated away.
I think it does a disservice to listeners to pound the table over future estimated spending without taking into consideration future revenues as well. Why is the focus simply on spending (excessive estimates in my opinion) and nothing is ever said by you about incomes generated based on future economic expansion, trade and taxation?
We do not have a one sided ledger sheet. Surely you know that.
Obviously though it plays better to the choir of fear mongers and Preppers to hear more about the impending bills while remaining ignorant of the means to how it will all be repaid. GDP expanded by a trillion dollars last year alone in the US. Taxes are set to rise. Expenditures are being pared little by little and the deficit is not growing as quickly as it once was.
Furthermore it cannot be fogotten that the US is still far and away the largest economy in the world and manufacturing is returning here as a combination of energy costs in decline and rising wages in the developing world have spurred reinvestment back on home territory. We are now seeing genuine signs of a recovery bit by bit and growth, while not stellar, continues to defy those who claimed we should be deep in recession.
Basically what I am saying is that I think the language you are using and your forcefulness that amounts to scaremongering is off the mark while not delivering a balanced perspective on what is taking place with regards to debt accumulation as opposed to the ability to pay it down.
Of course I do agree with you that debt is too high. Your comments on past balanced budgets and the social security trust fund were insightful and very interesting too. I would also agree the deficit is still a freight train out of control. What my objection is about is a lack of discussion on revenues and income and how those opposing forces will modify projected economic outcomes that are currently presumed to be disastrous.
We do not live our lives in a vaccuum of public debts only. Sounding the alarms however is a legitimate exercise and we all appreciate that effort but lets please keep our heads screwed on and maybe turn down the rhetoric a notch or two. Suggesting the US is bankrupt is just a little too extreme for my liking.
What exists is a debt to GDP ratio possibly exceeding 90% at most but the world is certainly not ending because of that and anyone who is informed will appreciate this situation can continue for a very long period of time before a default scenario is even remotely possible.
So please stop scaring the kids, Bob. Lets have a discussion that is a little more balanced for a change. The government has most certainly NOT destroyed the economy as you stated. At worst they are attempting to deal with a situation related to past excessive credit creation that has run its course and it is surely not within the power of anyone to turn back the clock on that in an environment of demographically induced deflationary forces.
The business cycle is alive and well as I see it. Nothing has changed in a thousand years. The blame game is therefore a waste of everyone’s time and the ryhthm’s must play out as they always do. So if you think you have better answers I would like to hear them but please spare me the tiresome “we must tighten our belts” anthem as that is already being done in Europe to disastrous results.
I am not trying to be disrepectful here Bob but as one old guy to another who has also been around and seen plenty lets behave a little more responsibly with our comments regarding the debt and how it will affect future generations.
PS: I like you Bob. Just think you go over the top too often
I have to respectfully disagree with you, Bird.
Very simplistically speaking, if your argument is 100% correct why is the Fed printing any money at all? Why is our national debt at the level it is? And, why is the U.S. National Budget running a HUGE deficit?
Where are you seeing manufacturing, at a meaningful level, returning to the U.S.
Why is the population of a major city like Detroit decreasing at a faster rate that water running out of a facet?
I don’t get it!
Ah yes, manufacturing. It is an open wound on the American psyche and perhaps one of the points that meets with the most commentary on fear and loathing about the future than almost anything other than the debt. But lets look at what is happening in the background before we dismiss what I believe is the beginnings of a resurgent trend in domestic production. The variables at work on the positive side include a well educated domestic population, clean environment, ready supply of cheaper fuel, advantageous taxation (or alternatively punitive taxes in other jurisdictions), high existing levels of productivity, increasingly competitive wages, surplus labour and a society well prepared for automation. On the other side, manufacturers are facing higher transport costs, new environmental levies, lack of transparency in doing business, corruption, rising rents and wages in the heart of the worlds manufacturing body (China) and poor access to their primary customer base. Transportation innefficiencies alone make a move to be closer to the buyers a desirable choice. All of this goes without even mentioning political considerations, tax holidays or incentives for new industry and a more motivated workforce. Yes, manufacturing is returning to the USA. It is just a trickle now but the incentives are aligning to make the choice of a next production facility more appealing when it is located in the market of highest demand. The basics amount to an improving outlook for cutting transport costs, clear tax policy, ease of doing business, education levels, rent and land cost, energy availability, a healthy environment for workers (!) and fairness of the system.
About the Fed……printing money is a pointless exercise if it does not circulate or get loaned out. It’s main value seems to be psychological impacts on the investment community who hear of large dollar numbers being shifted from one account to another but the exercise is mostly smoke and mirrors when those dolars don’t actually enter the economy.
On Detroit…..Al, that is an exception. I hope we won’t discuss exceptions and presume they are the rule.
Hi Bird,
It is intetesting that Mauldin was saying the same thing at the Casey Summit.
Still personally don’t see it but you guys are much brighter than I.
Good article and buoyance for the depressed.
http://seekingalpha.com/article/1725492-government-shutdown-buy-or-sell-gold-and-silver?source=email_rt_article_readmore