10.31.13 - Consumer Confidence Continues To Fall
Gold prices lower on Fed statement and a rising U.S. dollar. Jobless claims fall 10,000 to 340,000. Gold last traded at $1,323 an ounce. Silver at $21.87 an ounce.
There are more signs today of trouble in the US economy.
The Labor Department released its weekly unemployment claims report this morning and it indicates, like all recent jobs reports, the employment picture is worsening.
Economists had predicted there would be 337,000 new claims for unemployment benefits this week, but the number came in higher than expected at 340,000.
The four-week average of claims, usually a more reliable number, rose by 8,000 to 356,250 touching the highest level since mid-April. Claims are still above end-of-summer levels.
Not surprisingly consumer confidence is on the wane. The Bloomberg Consumer Comfort Index fell in the period ending October 27 to minus 37.6, the weakest reading since October of 2012. More pessimism among the jobless shows limited employment opportunities are weighing on consumer attitudes about making purchases, which could translate into still more economic sluggishness going forward.
No doubt contributing to declining consumer confidence is the fiasco of Obamacare.
Against this backdrop, the Fed has decided to extend Quantitative Easing until it sees clear evidence the economy can grow decently without its help. That may be a long wait.
10.30.13 - Fed Maintains Bond-Buying Stimulus
Gold closes lower on Fed statement and slowdown in U.S. private-sector job growth. Fed says economy too weak to begin taper. Gold last traded at $1,349 an ounce. Silver at $22.98 an ounce.
All eyes are on the Federal Reserve Open Market Committee, which meets today to discuss America's current economic condition and monetary policy.
The general consensus is the Fed will continue its accommodative policies in hopes of stimulating economic activity.
This is especially likely given a series of concerning reports from the economy.
ADP issued its widely watched private sector employment report, which showed a weak 130,000 gain in private sector employment in October. The September number for the same report was also revised down to 145,000 from 166,000. This is the weakest jobs report from ADP in 6 months. Yet another sign that the economy is stagnating.
How weak is the economy? Since 2008, the federal government has paid out 881 million weekly unemployment benefit checks during the current economic slowdown, totaling $252 billion.
24 million people have received long-term unemployment benefits, compared with 8 million during and after the 1982 and 2002 recessions and 9 million after the 1991 recession.
And the average recipient is out of a job for far longer, collecting 38 weeks of benefits, compared with a high of 17 weeks after the 1991 recession.
Clearly, Fed policy has failed to boost economic activity to anywhere near an acceptable level and now there are indications the economy is slowing yet again.
The one thing Fed monetary policy has accomplished is to weaken the US dollar. That policy, along with the hangover from the recent political conflict in Washington DC, has set the stage for an even weaker dollar going forward.
Investors are demanding an unprecedented risk premium due to the specter of another political crisis in the first quarter of 2014, when the current agreement between the Republicans and Democrats expires.
Also contributing to the Dollar's woes and America's economic problems is US fiscal policy.
As of today, each individual American's share of our national debt is now $1.1 million. Writing in today's Washington Times, Dr. Ben Carson, MD points out Americans earning $69,000 or more, which includes most of the middle class and all of the upper class, have a combined adjusted gross income of $5.1 trillion, making up a huge economic engine.
The problem is the annual federal budget is $3.5 trillion, which is 2/3 of that amount. Federal spending is a terrible drag on the US economy. There is simply not enough money in the private sector for the US government to tax to bring down the federal debt in any meaningful way. Spending, as Dr. Carson points out, is out of control.
As long as US fiscal and monetary policy remain out of control, the US dollar and the US economy simply cannot be truly strong. Americans must look elsewhere for strength. Gold has stood strong as a store of value for 5,000 years.
10.29.13 - Problems Continue In Government Programs
Gold prices lower on bearish outside market forces. Consumer confidence plunged to a six-month low. Gold last traded at $1,345 an ounce. Silver at $22.49 an ounce.
There are two things Americans are buzzing about this week ...
1. The failed launch of the Affordable Care Act
2. New revelations the National Security Agency (NSA) has been spying on leaders of friendly nations.
The technical "glitches" continue to plague Obamacare. The website is not functioning properly and no one seems to be accountable for the $400 million to $600 million (depending on whose numbers you use) appropriated for the web system or why the system has failed so miserably.
Theses problems were largely overshadowed by the news that, despite repeated assurances from Obama himself, tens of thousands of Americans are losing their current healthcare coverage and will be forced to pay for new healthcare that costs as much as five times more than their original coverage.
These problems are not glitches. This is how the system is supposed to work and the Obama administration has, according to NBC News, been concealing this fact since 2010.
Meanwhile, Obamacare is not the only major government program provoking ire.
According to the Government Accountability Office (GAO), Social Security has overpaid at least $1.3 billion in disability benefits over the past two years alone. All due to "critical failures" in the Social Security Administration's (SSA) operations. Worse yet, the SSA's knee-jerk reaction to these overpayments has been to accuse recipients of outright fraud.
Meanwhile, a war of words is playing out between the Obama administration and the US intelligence community. Earlier this week it was revealed the National Security Agency (NSA) was monitoring the communications of friendly world leaders, such as Angela Merkel of Germany. This has caused outrage among America's allies. Obama's response has been to deny any knowledge of the program and to announce he has ordered it ended.
This stands in contrast to a featured article in the Los Angeles Times in which current and former high-ranking members of the intelligence community claim the White House and the Secretary of State were both given briefings on the program.
On the economic front, two reports came out today that reinforce the notion the Federal Reserve will continue to debase the US dollar through its program of Quantitative Easing.
U.S. consumer confidence fell sharply in October as consumers turned gloomier in their outlook for the future, according to The Conference Board, an industry group that has published the widely-watched consumer confidence measure for decades.
Against this backdrop, it isn't at all surprising that the October CNBC Fed Survey found Wall Street is expecting the Federal Reserve to maintain its $85 billion level of monthly asset purchases (Quantitative Easing) until April 2014.
10.28.13 - Markets Await Fed Decision
Gold prices closed flat as traders await Fed statement. Stocks waver on mixed economic reports. Gold last traded at $1,352 an ounce. Silver at $22.54 an ounce.
The price of gold has now reached a 5-week high as the overall economic climate has turned in its favor.
The primary impetus behind the climb is the Federal Reserve's ongoing "easy money" monetary policy through Quantitative Easing. Quantitative Easing, of course, is the program under which the Fed purchases billions worth of US Treasury securities on the open market in an effort to jump-start economic activity by injecting more dollars.
The results of this move have been decidedly mixed. The economy has been anything but robust and the value of the US dollar has weakened considerably.
Leave it to the government to apply more of something that isn't working. CNN/Money reports today that Quantitative Easing is expected to continue through at least March of 2014, making it the largest Fed bond-buying program ever.
Meanwhile, the inflation doves are starting to make themselves heard. Over the weekend the New York Times featured an article entitled, "In Fed and Out, Many Now Think Inflation Helps."
In the article, several economists endorsed expanding inflationary monetary policies and actually boosting the inflation rate, as expressed by the Consumer Price Index, to a 6% rate. This school of thought sees inflation as the solution to America's economic problems.
Given this philosophy it is worth noting the highest years for inflation in the post-World War II period were also the worst years for the stock market and stellar years for the price of gold.
All of this is troubling for the US dollar, a currency that can't take much more pressure. Today's Financial Times explained that confidence in the US has been slipping due to the dysfunctional political conflicts in Washington. This, with other factors, has weakened the dollar. To make matters worse, a continually weakening dollar is eroding America's superpower status. Continuing policies that could weaken the dollar further have implications far beyond the financial realm.
Among the many reasons to lose confidence in the US government is the ongoing debacle of Obamacare. At the end of last week the administration's official position was that the program was "fixable" and the "glitches" would soon be worked out. Today, the system crashed again but this time due to a different technical reason. Obamacare, it seems, has simply turned into another crisis of our own making.
Many investors around the world are turning to gold. Governments don't necessarily like it when investors turn to gold. The Indian government has instituted regulations in an attempt to discourage demand for gold. Despite these regulations, the latest reports indicate that demand for gold in India is still flourishing.
10.25.13 - Bullish Outlook For Gold
Gold prices closed higher on Friday, gaining almost 3% for the week. U.S. dollar lower on weaker consumer sentiment. Gold last traded at $1,352 an ounce. Silver at $22.64 an ounce.
The outlook for gold is increasingly bullish. Traders and economists agree the continuation of Quantitative Easing will be supportive of gold prices. This will also make it difficult for the Fed to try to "talk the price of gold down" behind the scenes in a futile attempt to defend the very dollar Fed policies are debasing.
One economist who is particularly bullish on gold is Brent Johnson, the CEO of Santiago Capital, who believes the economic problems in the United States will lead to a $200 rally in gold over the next two months.
To Johnson, America's national debt leaves the US in dire shape and will end up pushing gold higher.
"My kind of unofficial tagline is: You either believe in math, or you believe in magic," Johnson told CNBC. "I happen to believe in math. And the projection that our U.S. debt level is on is starting to go exponential—and the way the system is designed, it's going to increase even more."
"There's a very high correlation between the monetary base, the national debt and gold," Johnson said. "For the long-term picture, that's the main driver [of gold]".
Johnson says the U.S. will have to create more inflation to pay down its debt. As dollars lose value to inflation, it will take more of those dollars to buy an ounce of gold—thus pushing the price of gold higher.
"I do think the correction in gold is largely over," Johnson said. "I expect gold to go much higher even toward the end of the year, and on into next year."
The national debt is not the only thing creating problems for the US economy.
HelloWallet, a D.C. firm that offers technology-based financial advice to workers and conducts research of economic behavior, has published a new report that found a majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation’s troubled system for old-age saving. As a result, the retirement readiness of most Americans has been slipping. This has implications for all individual investors as well as America's already acute fiscal distress. As this pattern continues, more and more Americans will be dependent on Social Security, which is already collapsing under the weight of its current obligations.
Speaking of government entitlement programs, the US Census Bureau released a report today that showed more Americans are on welfare than those who are working full-time. This is an unsustainable situation that will only aggravate the debt and deficits on the federal level.
Given these factors, it isn't any wonder the Thomson Reuters/University of Michigan's consumer sentiment index has now tumbled to its lowest level since the end of 2012. American confidence in the economy is already low and still declining.
10.24.13 - Problems With Obamacare Continue
Gold prices settle above $1,350 on a weaker U.S. dollar. Stocks rise on hopes for improved global economy. Gold last traded at $1,350 an ounce. Silver at $22.82 an ounce.
Now that the impasse over the partial government shutdown and the debt ceiling are behind us temporarily, much of the country is focused on the initial failure of Obamacare.
This failure illustrates the perils of big government. Some folks have signed up for health insurance coverage under the program, only to find the premiums are higher than their current coverage. That is if they were lucky enough to gain access to the site and purchase a plan.
Keep in mind these same systems, departments and agencies of the federal government will be tasked with managing YOUR health care in the years ahead.
The most disheartening aspect is what this costing taxpayers. Billions of dollars we don't have to spare.
There is one small consolation: evidently the IRS won't start imposing fines on people who don't have health insurance for at least 3 months past the January 1st, 2014 deadline.
The US jobs market sent more mixed signals today. The number of people who applied for U.S. unemployment benefits fell by 12,000 but the four-week average of claims, usually a more reliable number, jumped by 10,750 to 348,250 to mark the highest level since early July.
With this in mind, the Federal Reserve will not be interested in tightening up monetary policy any time soon. In fact central banks around the world, which had previously alluded to tightening monetary policy, have reversed course.
The central banks of Canada, Norway, Sweden and the Philippines all decided to leave their current interest rates in place; while Hungary, Latvia, Egypt, Romania, Serbia, Sri Lanka, Mexico and Chile have cut interest rates.
Central bankers are concerned about what they see as a "false start" to the recent economic recovery.
Not surprisingly, these trends have resulted in higher gold prices. Today alone the price of gold is up some 1% to over $1,345, the highest level in 5 weeks.
10.23.13 - The Economic "Recovery" Is Losing Momentum
Gold prices ended slightly lower on profit-taking and a corrective pullback. U.S. stocks fall after mixed earnings report. Gold last traded at $1,332 an ounce. Silver at $22.60 an ounce.
The financial world continues to digest yesterday's disappointing US employment report. Today, instead of climbing, stocks are falling due in part to the weak earnings reports. Yet another sign the current economic "recovery" is stagnating and losing momentum.
The employment report was the first sign of that stagnation. The Labor Department reported the US economy had only created 148,000 jobs during September, well below the 180,000 anticipated by economists.
Now we are seeing some of the details of that report, which add to the concerns.
For example, the number of Americans who have decided not to participate in the nation's labor force has set a new record. Over 90 million people have given up on finding a job. This puts the slight improvement in the unemployment rate in perspective, since the unemployment numbers don't account for those who have removed themselves from the labor force. That number has grown by 10 million since Obama took office 5 years ago.
In other news, former Fed Chairman Alan Greenspan was interviewed by CNBC yesterday and had one very ominous warning investors should make note of: Greenspan claims no form of traditional economic forecasting can anticipate or keep pace with irrational risk-taking and catastrophic asset bubbles.
He may as well be advising people to buy gold as the only form of security against the unexpected over the past 5,000 years has been to own gold. Only gold has stood strong as a trusted medium of exchange and store of value during a variety of economic environments; boom and bust, peace and crisis.
10.22.13 - Economic Recovery Still Weak
Gold prices rose 2% after a disappointing jobs report spurred bets the Fed will not taper any time soon. Stocks mostly rise, U.S. dollar falls. Gold last traded at $1,342 an ounce. Silver at $22.79 an ounce.
The latest jobs report has been released by the US Labor Department and the results indicate the economic recovery is still very weak.
According to the report, the economy gained 148,000 jobs in September, while the unemployment rate fell to 7.2% from 7.3%. Economists had been expecting 180,000 new jobs in September. Job growth in the all-important private sector (an average of 129,000 over the past three months) is only about half as strong as it was at the outset of the year (at 232,000) indicating a slowdown, rather than an acceleration, in the economic recovery. The labor-force participation rate held near 35-year lows, meaning Americans are giving up on finding work and are thus no longer counted on the unemployment rolls.
The report was also delayed by the 16-day partial government shutdown and subsequently does not cover the shutdown period. The October report is due out on November 8, one week later than usual. This disappointing jobs report covered the period before the shutdown which means the labor market began to lose momentum before the shutdown entered the picture.
It is no surprise Americans feel uneasy about the economy. Just 29% say economic conditions in the country are good right now, according to a new CNN/ORC International poll. That's down four percentage points since late September and is at the lowest level of the year. The survey also indicates economic pessimism is growing in the wake of the shutdown, with nearly six in ten forecasting poor economic conditions a year from now.
All of this has profound implications for US monetary policy and thus gold.
It was assumed the US economy would have been stronger by now and most economists figured that the Federal Reserve's Quantitative Easing program would have been "tapering" off as well. It is now not only likely Quantitative Easing will continue, but it is also very possible it will be expanded.
A combination of low consumer and investor confidence and a monetary policy that debases the US dollar sets up a bullish scenario for gold.
10.21.13 - Americans Lose In Debt Ceiling Resolution
Gold closed slightly higher, building on last week's gains, as traders prepare for a week full of earnings and economic reports. Existing home sales dip 1.9% in September. Gold last traded at $1,315 an ounce. Silver at $22.28 an ounce.
The recent agreement in Washington did little more than delay the continuing political conflict. International observers expect more drama as the next deadline for raising the debt ceiling looms in February.
The Fed is currently buying $85 billion worth of bonds every month. Marc Faber, publisher of The Gloom, Boom & Doom Report, told CNBC he believes that number could increase to $150 billion, $200 billion, or even a trillion dollars a month.
As our Chairman Craig R Smith recently wrote at Breitbart.com:
The day after the “deal” [in DC] was complete, the dollar took a pounding in the international market, and rightfully so. China downgraded our credit, rating agencies threatened to follow suit, and gold rose over $36. The world knows the ineptness of this president and what the lap dogs at the Fed will do as a result of this surrender by the House. The Fed will now print billions, at minimum, and more likely trillions of U.S. dollars to fund everything from the $3 billion pork Kentucky dam project to the most expensive entitlement plan in the history of our nation, Obamacare.
We know the Fed has already created at least $5 trillion and has tripled its balance sheet to $3.9 trillion. They are also currently buying $85 billion a month of MBS and U.S. treasuries. I suspect that number will grow higher. Much higher. And any talk of tapering is now but a distant memory.
The Fed seems willing to risk high inflation and continue to debase the value of the dollar in an attempt to try to jump-start economic activity.
There are bright spots, however, such as the outlook for the price of gold. Demand for gold is on the rise. Included in the demand for gold has been a trend toward increased gold purchases by world central banks, adding to a fundamental picture for the price of gold that is decidedly positive.
10.18.13 - Did Congress just steal Christmas?
The US Debt jumped a record $328 billion in just one day after being artificially suppressed since May 17th. Today was the first day the Federal Government was afforded the ability to borrow under the deal reached earlier in the week. Instead of setting a dollar cap, Congress set a deadline, which means the debt will increase by however much the government spends between now and February 7th. According to The Washington Times' Stephen Dinan, “Judging by the rate of increase over the last five months, that could end up meaning Congress just granted Mr. Obama a debt increase of $700 billion or more.”
The dollar also continued its plummet as the Fed's “easy money” policy looks to be firmly in place. With the holiday season on the horizon, retailers fear that consumers will hold back on purchases this year for fear of what may come early on in 2014. With a recession in the cards, shoppers may sit this season out. According to Jay Stein, chairman of Stein Mart, “The biggest enemy of consumer confidence is uncertainty”.
Amongst the turmoil in the paper markets gold continues to shine. The precious metal was up more than 3 percent for the week to the highest level in two weeks.
The decline of the dollar due to our nation's Progressive policies is explained in our most recent book, The Great Withdrawal. The review below sums up the state of our nation:
I received your fascinating book yesterday and have not been able to set it down. I have read much of the history of the Progressives and now, at 94 years of age, I have lived to witness the fruits of that system.
To give you an idea of my background. I was born in Arkansas in 1919 and lived through the Great Depression. I volunteered for military service 7 months before Pearl, served in the Army Air Corp, went to the Middle East, Help Monty and the British 8th Army across North Africa, flying B-25 Mitchells. After the war I went back to school and became an Electrical Engineer.
I have read much of the history of Progressives including Teddy Roosevelt and Woodrow Wilson, did not like it then, and I don't like it now. Now I find myself in a country in which God only knows how it will end.
From what I have read of your book, it seems like you have a good knowledge of what Progressives are all about. From where I set, it looks like this Once Great Country will have a very difficult next 50 years. I don't believe I have that much time left. We have had 3 & 1/2 generations without American History being taught in our schools, that is not a good base to build on.
P.S. Keep up the Good Work
10.17.13 - The Crisis is Far from Over
Politicians are unreliable and traders are fickle. Just 48 hours ago, a doomsday deadline loomed in the hearts and minds of financial market participants around the world.
But yesterday afternoon an agreement was reached and the crisis was averted. So Wall Street should be euphoric, right?
Not exactly. The markets are mostly flat, with the Dow actually down today.
GOLD is up. Sharply. In fact, gold is up some $40 per ounce as of mid-day Eastern Daylight Time. That's more than 3%.
Why are stocks sanguine while gold is soaring?
Because the dollar is weak and because a major Chinese credit rating service has downgraded America's credit rating as a result of the recent events in Washington DC.
The dollar is weak because the political deal in Washington only means the Fed's monetary policy of Quantitative Easing must and will continue for the foreseeable future. Such an easy monetary policy in which dollars are created by Fed purchasing of US Treasury securities on the open market only increases the supply in a world already awash in dollars.
Meanwhile, China's Dagong Global Credit Rating trimmed the U.S. rating by a notch saying the agreement in Washington does not defuse worries about the U.S. deficit or improve the country’s ability to repay in the long term (which is, of course, true).
This is particularly significant because China is America's largest creditor nation. Dagong's opinion matters because it could curtail China's already faltering appetite for US Treasuries. Something that portends negative long-term consequences for the US stock and bond markets, since such a trend will tend to push US interest rates higher.
Dagong's action comes on the heels of American credit agency Fitch warning it is also contemplating a downgrade of America's credit rating.
The US is already being mocked by the official Chinese news media as a result of the turmoil over the past two weeks, so it isn't surprising that Dagong would beat Fitch to the punch and downgrade America. Global economists are now talking openly of the US dollar losing its status as the world's reserve currency. Some world central banks are starting to diversify into Japanese yen, Swiss francs and Chinese yuan at the expense of the dollar. All of those paper currencies have problems of their own, which is why world central banks quit selling gold months ago.
The basic, underlying problem here is that this deal did nothing to address the fundamental problems with America's national fiscal situation. The can has simply been kicked down the road, setting up another showdown in January. Meanwhile, the US debt continues to climb as government spending and borrowing continue to climb. Right now, at $16.7 trillion, the US national debt is equal to more than $52,000 for EACH man, woman and child in the United States.
The US economy will also suffer as a result of the two-week partial shutdown of the federal government. According to Standard & Poor's the shutdown will shave $24 billion from GDP. And GDP growth estimates for the 3rd quarter have been revised downward from 3% to 2.4% as a result. This is perhaps a testament more to how overgrown government has become than to how vital government is to our economic livelihood.
10.16.13 - Government Stalemate Over, For Now
Gold prices closed near one-week high after U.S. senators reached a deal to end the government shutdown and raise the nation's debt limit. U.S. stocks, Treasurys rally on Senate debt deal. Gold last traded at $1,282 an ounce. Silver at $21.37 an ounce.
According to news reports, a deal has finally been struck in Washington to end the stalemate, send the government back to "work," and avert the faux default the US Treasury Department claimed would result from a failure to raise the debt limit.
Not surprisingly, the stock market is jumping for joy over this turn of events but what Americans should really be watching is the reaction of the US dollar to this apparent deal.
The dollar declined by 0.2% today against a basket of 10 foreign currencies despite the news out of Washington. Not surprisingly, the price of gold rebounded on the dollar's weakness.
Why would the dollar decline on the news of a deal to avert what some said would be a financial crisis? Because all the deal does is authorize the US government to increase its borrowing even more, exacerbating its already dismal fiscal situation and more than likely prolonging the Federal Reserve monetary policy of money creation through the purchase of Treasury securities.
In this case, the dollar's decline is "the cloud in a silver lining."
We haven't seen the last of this type of drama. America's fiscal situation is characterized by a continued impasse over entitlement programs--Social Security and Medicare--which are unsustainable. Periodically we will continue to see the necessity to raise the debt limit as these programs pile up red ink. And when we come to those situations, the possibility of a financial crisis, real or contrived, will reappear.
What has been achieved is an extension of a game of charades and little else. Once again, the politicians in Washington have kicked the can down the road without doing a thing to address the fundamental problems.
Washington's brinksmanship could have a more lasting effect than some suppose. Fitch credit rating service, the third largest investment rating service in the world, announced the 11th hour conflict was not something characteristic of a AAA-rated financial power and that they would have to consider downgrading America's credit rating as a result. They see eventual repeats of this recent stalemate and thus increased risk for investors and creditors. Millain Mulraine, director of US research and strategy at TD Securities, told clients that he expects Fitch to follow through on its warning and downgrade America's credit rating by the end of the first quarter of 2014.
Keep in mind that Standard & Poor's downgrading of America's credit rating was one of the precursors to a near financial crisis in 2011 and resulted in a painful decline in the US stock market.
10.15.13 - Politicians Still Proving To Be Unreliable
Gold prices end lower on signs the standoff in Washington could end this week. Stocks fall as investors evaluate the standoff in Washington. Gold last traded at $1,273 an ounce. Silver at $21.19 an ounce.
What a difference a day makes.
24 hours ago, Wall Street was optimistic a deal was close to end the shutdown and head off another impasse over the US debt ceiling. Now the mood on Wall Street is decidedly negative as the politicians in Washington, DC have proven yet again to be unreliable and unpredictable.
In the short-term, the political impasse is bad news for stocks, but the long-term implications of Washington's dysfunction are much more serious. This latest episode adds to the already ample evidence that the US dollar is in inevitable decline. In fact, as foreigners lose confidence in Washington, the dollar's decline accelerates.
Confidence in the dollar is especially lagging in China, America's number one creditor. This won't do much for global appetite on US Treasuries, a key component in America's continuous effort to service its debt. Should China and other foreigners reduce their purchasing of Treasuries, they will likely turn to other safe havens. Right now, no other currency--not the yen, not the euro, not the yuan--is anywhere close to taking the dollar's place, but that doesn't mean there aren't other safe havens out there, notably gold.
It is ironic this is happening largely as a result of scare tactics used by the Administration. As Swiss America Chairman Craig R. Smith pointed out in his column at Breitbart (http://www.breitbart.com/Big-Government/2013/10/10/Stop-the-Debt-Ceiling-Scare-Tactics), the "fear merchants in D.C." are telling the world that default is not just inevitable if the US fails to raise its debt ceiling, it's also imminent. With dire consequences.
As we mentioned yesterday, perception is winning out over reality as the entire world is ringing its hands about the October 17th deadline. World central banks, such as the Bank of England and the Bank of Canada, are reportedly preparing contingency plans for a US default. Make no mistake, if the US was to default on its debt, it would have to be through a deliberate act by the administration. Given the actual cash flow, the US has the monthly income to service the interest on the debt.
So the world is fearful of the US deliberately not meeting its obligations, certainly an unprecedented circumstance.
It's no wonder the stock market is reversing its recent rally. Meanwhile central banks have stopped selling gold, a sign they find wisdom in holding a crisis commodity in the current environment. Manipulative efforts to keep the price of gold low won't be able to hold up for long when the world no longer trusts America to pay its bills.
10.14.13 - Experts Worry Over the Future Of The U.S.
Gold prices on the rebound as budget stalemate continues. U.S. stocks slightly rise on hopes for fiscal deal. Gold last traded at $1,276 an ounce. Silver at $21.35 an ounce.
On Friday, the financial markets were euphoric as it appeared a deal to end the political stalemate was near. In the end, no such deal was made.
Traders on Wall Street are keeping an eye on Washington today, as rumors swirl about a deal being reached by day's end.
Not surprisingly, the financial markets reacted by starting off down, then rebounding. Gold rose from the outset as savvy traders figured a safe haven was there best bet regardless.
Over the weekend, experts began to look at the broader, more significant economic numbers and the implications of these periodic impasses in Washington.
Perhaps most significant was an editorial published by China's government-controlled Xinhua News Agency which scoffed at the US shenanigans and called for a "de-americanized" world. This has significant short and long-term implications for the US dollar since China is the biggest creditor to the US and is also largely viewed as the ascending rival to the US in geopolitical and economic affairs. Not only does China have a potential incentive for replacing the dollar as the world's reserve currency, their huge positions in US debentures could give them the means. With the US Treasury already debasing the currency with "Quantitative Easing" and the US government spending an infinitum, taking positions in hedges against a falling dollar is probably a very wise move.
Gold, of course, is historically one of the best such hedges.
The Chinese are certainly not the only folks worried about the situation involving the US debt ceiling.
• Christine Lagarde, Managing Director of the International Monetary Fund, told NBC-TV's "Meet the Press" on Sunday that the US's political impasse on the raising of the debt ceiling was of great concern. Lagarde also admitted that America's ongoing trouble with entitlement spending was also a concern, but separated that issue from the possibility of the US failure to raise its debt ceiling, something she indicated would shake confidence in the global economy and financial markets.
• The president of the World Bank, Jim Yong Kim, called the 17 October deadline for raising the US debt ceiling a "very dangerous moment," saying, at the very least, the world would face immediate higher interest rates, falling confidence and a slowdown in economic growth. Such a scenario would be terrible for the stock and bond markets.
So, even though some observers say the risk of a default on US debt is exaggerated, the markets have become convinced. In this case, perception is more important than what some claim to be reality.
This situation bears watching, with gold clearly standing out as the real safe haven in the event both stocks and bonds are hit at the same time. Still, we would remind everyone, even if a deal is struck to raise the debt limit and a near-term crisis is avoided, US fiscal and monetary policy remains irresponsible and damaging. Thus making the US dollar a poor bet and assets negatively correlated with the dollar--such as gold--absolutely essential.
10.11.13 - Still No Deal in Washington
Gold prices end lower as a possible breakthrough in Washington weighs on safe haven assets. Consumer sentiment lowest since January. Gold last traded at $1,268 an ounce. Silver at $21.26 an ounce.
The financial markets showed irrational exuberance today over the possibility of a deal in Washington DC. Stocks climbed steeply yesterday and again today.
It is perplexing that Wall Street seems euphoric over the prospect of a deal (at press time, no deal had been reached). All such a deal would produce is an agreement on the status quo. Without a serious compromise on the spending debate, we are quite likely to see these types of political stalemates play out repeatedly in the final three years of Obama's presidency.
In contradiction to the stock market jump, morning trading of gold saw a sharp decline in price. It appears a single, large sell order sent the price down $25 per ounce resulting in circuit breakers activating in the market. The spot price did rebound to a considerable degree and is down just over $14 per ounce on the day.
While Wall Street was popping the corks this afternoon, economic data told a different story across America. U.S. consumer sentiment deteriorated in October to its weakest level in nine months. The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment fell to 75.2 in October, down from 77.5 in September. This was the lowest figure since January. While the fat cats on Wall Street are celebrating, average Americans are worried. With this dichotomy ever widening, one has to call into question whether the stock market rally is sustainable.
In the news this week were two reminders that external factors can also have sweeping effects on the markets. The first was a memo from the U.S. Airline Pilots Association detailing what appear to be, "probes, or dry runs, to test our procedures and reaction to an in-flight threat". These incidents serves as a reminder that terrorism is still alive and well. Terrorism, whether in threat or deed, wreaks havoc on markets. Especially markets already fraught with instability.
The second came from the Iranian news media, though it was largely ignored here in the US. The Iranians announced they are prepared to begin launching satellites into orbit on rockets. The payload and flight profile characteristics of such rocket launches is almost identical to that of an intercontinental ballistic missile carrying a warhead. Meanwhile, reports surfaced that the Israeli air force has been practicing long-range strike missions. Should something escalate surrounding Iran and Israel, the implications for the financial markets could be profound.
Gold is known as the "crisis commodity." But the key is owning gold before the crisis hits.
10.10.13 - Breakthrough in DC!
Gold prices end lower Thursday on a proposed plan to temporarily raise the U.S. debt ceiling. Obama nominates Yellen to become next Fed Chief. Gold last traded at $1,296 an ounce. Silver at $21.90 an ounce.
It appears a temporary breakthrough in DC may be reached soon thanks to a House Republican proposal for a temporary increase in the federal debt limit.
While no formal announcement has been made, President Obama responded positively to the proposal through his spokesman.
But before we get too euphoric about this deal, the Treasury leak about a possible financial crisis appears to have been a political scare tactic. That evidence comes to us from Goldman Sachs via the American Enterprise Institute. For better or for worse, Goldman Sachs has always been regarded as the ultimate insider at the Treasury Department and Federal Reserve, with personnel often moving back and forth between Goldman Sachs and government service multiple times over the course of their careers.
Despite the dire warnings from the Treasury Department about a possible default, Goldman Sachs published these thoughts for its clients:
• "After October 17, the Treasury can keep conducting auctions to roll over maturing securities, but it cannot increase outstanding debt. Under current sizes, October’s month-end settling auctions would raise a large amount of net cash."
• "However, we do believe that the Treasury could ensure that enough cash was available to make interest payments on Treasury securities. There are other strategies the Treasury might also be able to pursue."
In other words, if the debt ceiling was not raised by the October 17th deadline, there is no reason to believe a default would be imminent.
Nevertheless, there is much to be disturbed about when it comes to the national debt.
When President Obama entered office in January 2009, the national debt stood at $10.6 trillion. Right now it stands at $16.7 trillion. An increase of 57% over 5 years. By way of comparison, the debt increased 38% over 8 years under the Bush administration and 32% over 8 years under the Clinton administration.
Given this situation, it is no surprise that US Treasury securities have lost a certain amount of appeal. Earlier today the operator of Hong Kong's futures and options markets cut the value of short-term US Treasury bills held as collateral.
America's debt picture is bleak and there is no plan in Washington for improvement. That has ominous long-term implications for the US economy, financial markets and especially the dollar.
We can now couple this fiscal threat with the promise of continued monetary fecklessness from Obama's Fed chair nominee, Janet Yellen. Yellen commented yesterday that she would put renewed emphasis on "jobs", at the expense of keeping inflation in check.
There is no scenario in which the US government can continue to run up gargantuan debt while the Treasury Department is creating money out of thin air without the US dollar suffering a depressing fate. And, historically, the best hedge against a declining dollar is gold, both because gold is the ultimate form of real money and because gold is priced in dollars.
Additional economic data was also revealed today that indicates there will be continued pressure on the dollar going forward. The US trade deficit with China surpassed $30 billion for the first time ever during July, pushing America's overall trade deficit up some 13.3%. A lower dollar makes US exports cheaper overseas as the US battles to reduce its trade deficit.
In related economic news, weekly claims for unemployment benefits substantially exceeded forecasts in the latest report, spiking to the largest increase in 6 months. Should this be the start of a trend, rather than an isolated spike, it could mean the onset of "stagflation," the combination of rising unemployment and rising inflation. This same phenomenon was seen in the 1970s and resulted in the price of gold tripling and the S&P 500 falling 45% in just 21 months. Needless to say, economists and financial analysts will be carefully watching inflation and employment statistics in the months ahead.
10.9.13 - Obama Nominates Janet Yellen
Gold prices lower Wednesday on a higher dollar dulled demand for the precious metal. Obama nominates Yellen to become next Fed Chief. Gold last traded at $1,307 an ounce. Silver at $21.89 an ounce.
The financial markets have finally found something else to focus on other than the government shutdown and impending new impasse over the debt ceiling. President Barack Obama has nominated long-time establishment Federal Reserve insider Janet Yellen to chair the Fed.
Yellen is seen as a dove on monetary policy, favoring strategies aimed at lowering unemployment at the risk of driving inflation higher. She has said she does not believe there is often conflict between the two Fed goals of full employment and stability of the currency. A belief that flies in the face of decades of economic reality.
The financial markets cheered her appointment because the game of musical chairs the Federal Reserve has been playing in the form of "Quantitative Easing" is likely to continue under Yellen. The problem is, eventually the music stops and not everyone has a place to sit.
Inflationary monetary policies are great, until the inflation genie gets out of the bottle. Once that happens, controlling it is difficult to put it mildly.
Inflation may not come tomorrow, or even next month, but at some point in the future, the policies espoused by the Federal Reserve will result in a high inflation environment. The likes of which haven't been seen in the US in some 40 years.
In other important but largely ignored news, Greece is contemplating seizing private assets to bail out its bloated, unsustainable entitlement programs:
"... the Greek Labor and Social Insurance Ministry is 'seriously considering drastic measures in order to obtain the social security contributions owed by enterprises and to avoid having to slash pensions and benefits.' What drastic measures? 'The ministry is planning to force companies to pay up or face having their assets seized, so that the 14 billion euros of contributions due can be recouped.'"
This is a dangerous precedent indeed considering Greece is hardly alone in its pension quagmire. Spain and Italy are in similarly dire straits. If Greece follows through on this threat, others may be tempted to copy them.
10.8.13 - Financial Markets Dominated By Uncertainty
Gold ends relatively flat Tuesday as worries grow for the looming debt ceiling. Dow falls over 160 points as shutdown drags on. Gold last traded at $1324 an ounce. Silver at $22.44 an ounce
Setting The Record Straight On Threat of Default - Craig R. Smith, Swiss America
Craig R. Smith spoke today on "Your World" with Neil Cavuto discussing the current situation regarding the debt ceiling. Smith and Cavuto explain the technical definition of a default is "when you don't make good on those interest payments to U.S. bond holders." When a country is unable make their interest payments to those who finance the debt, the faith in that credit is lost. "We are not going to default on the debt, having to prioritize bills does not mean you are going to default on the debt," says Smith.
President Obama has made several recent speeches warning investors of a U.S. default, scaring these investors out of the market and essentially "pouring gasoline on the fire." As a result, the Dow dropped over 160 points today. Instead, says Smith, "President Obama should be calming the markets, he should be reassuring the markets." Cavuto says "it is the equivalent of burning down an entire country because you can't win an argument." Visit our MEDIA PAGE to see the whole interview.
In Other News....
The US stock market fell today and the price of gold rose once again as concerns linger over the government shutdown. Stoking the fire is the possibility the US could default on debt payments if no agreement is reached. That milestone is now just 7 trading days away.
Both the Dow and the S&P 500 fell more than 1% today and the tech-heavy NASDAQ fell an even steeper 2%. Meanwhile, gold rose slightly on the spot market.
The financial markets continue to be dominated by uncertainty stemming from the political impasse in Washington, DC, which today showed no signs of being resolved. President Obama's only move was to announce he is in no mood to compromise with Congressional Republicans.
The standoff in Washington has put the US in an embarrassing position with the Chinese. The Chinese, who are America's biggest foreign creditor, would be directly impacted if the debt ceiling is not raised and the administration makes the decision to stop making debt service payments in a timely manner.
Chinese Vice Foreign Minister, Zhu Guangyao told reporters, “We ask that the United States earnestly takes steps to resolve in a timely way the political issues around the debt ceiling and prevent a US debt default to ensure the safety of Chinese investments in the United States.”
US banks are now preparing for a virtually unprecedented scenario. At some point, US interest rates will rise and depositors will start removing money from bank accounts that pay next to nothing in the current zero interest-rate environment to put money to work elsewhere. Banks that don't prepare ahead of time could see their stability shaken if there is a rush to the exits in today's "point and click" financial world. Should the US banking system be weakened under such a scenario, the outcome could contribute to a potential financial crisis. Americans must prepare for this ahead of time by diversifying into assets, such as gold, that are not dependent upon anyone's promises to repay.
Against this backdrop of uncertainty it is hardly surprising that the Gallup polling organization finds the latest weekly measure of US economic confidence saw its biggest decline since 2008 last week. Given the fact that 2008 saw the most severe financial crisis in modern US history, Americans should take careful notice and accumulate safe havens assets such as gold to protect their hard-earned wealth in the weeks and months to come.
10.7.13 - Gold Shines while the Gov't Stalls
There are several bullish signs in the gold market as it faces a second week of uncertainty touched off by the political stalemate in Washington.
Traders are moving into gold as concerns over the uncertainty surrounding the duration and impact of the government shutdown linger. The October 17th deadline for raising the US debt ceiling also looms, which the US Treasury Department has said could touch off a financial crisis if left unresolved. The price of gold jumped over $15 per ounce today (approx 1.2 percent) mainly on safe haven buying.
Former Clinton administration Chief of Staff John Podesta, who now heads the George Soros-funded, left-leaning Center for American Progress joined the chorus of those sounding the alarm about the government shutdown and the possibility of a default due to a failure to raise the debt ceiling. He called such a scenario potentially "devastating" and "disastrous." He also suggested that banks be required to be stress tested for exposure to a US default in a manner similar to what was done with European banks in 2012.
Niall Ferguson, a famous professor at Harvard who specializes in economic history, penned an editorial in The Wall Street Journal in which he pointed out that the shutdown was just political theater--a sideshow--and that the real threat continues to be the huge and growing US national debt. Ferguson points out that our debt and entitlement programs are unsustainable and sooner or later there will be a real financial and economic crisis as a result.
The move into gold as a safe haven is being reflected in statistics released from the US Mint which indicate that demand for gold coins is running ahead of 2012. Year to date sales now stand at 910,000 ounces, as compared to 857,500 for all of 2012.
Central banks are also turning to gold. The World Gold Council reports world central banks are on pace to add about 350 tons of gold to their reserves this year, worth about $15 billion. Russia in particular has been adding gold to its coffers, expanding its reserves by some 20%. So though the Federal Reserve has been acting irresponsibly with our money, other world central bankers are being decidedly more prudent by turning to the ultimate form of real money: gold.
10.4.13 - Debt Ceiling Debate: Fact or Fiction
Much, but not all, of America remained preoccupied with the government shutdown for a third straight day on Friday as the political impasse over Obamacare and the federal budget lingers into the weekend.
It is interesting to point out that while much of the mainstream news media seems focused on portraying the shutdown as a disaster, most of America is going about its business.
Now, there is debate over whether the impending October 17th deadline to raise the debt ceiling would actually result in the US defaulting on debt payments. Certainly the US Treasury Department is promoting that impression through reports leaked to the news media yesterday stating a failure to raise the debt ceiling would be catastrophic for the US economy, tanking the US dollar and trashing the stock and bond markets simultaneously. But other economic observers, notably Jeffrey Dorfman at Forbes, are now challenging that view declaring the government would not actually have to default on any debt payments should a deal to raise the debt ceiling elude the two warring political parties. The government could make debt payments simply by keeping its current spending in line with revenue, something it has needed to do for a long time anyway.
Whether the economy enters a crisis because of a failure to reach a deal on the debt ceiling or not, gold is still the essential asset for the foreseeable--as well as unforeseeable--future. After all, if a deal is reached, the government will go on spending, borrowing and debasing the dollar. Once this game of economic musical chairs finally reaches a conclusion, only gold will provide true security.
Whether the economic and financial crisis hits tomorrow, next week, next month or next decade; gold is still the financial insurance policy you need.
Wall Street and Washington, however, are indeed reacting to the shutdown and impending impasse over the debt ceiling. Blue chip stocks, as measured by the Dow Jones Industrial Average and S&P 500 were down for the second consecutive week.
Chief Economist Douglas Porter of BMO Nesbitt Burns said of the conflict in Washington: "it’s two nuclear submarines hurtling at each other, where we’re not quite sure who’s in control of one of the subs.”
Jessica Hinds of Capital Economist recalled that the last time there was an impasse over the debt ceiling in Washington in July to August 2011, the stock market was hit hard by the uncertainty.
Moody’s Analytics Chief Economist Mark Zandi commented that if Congress fails to raise the federal debt limit this month it will cause a “very, very severe recession with no obvious way out,” basically echoing the Treasury Department's alarm.
All of this activity and dire talk isn't helping the US dollar which was hovering just above an 8-month low as US financial markets closed for the weekend. Perhaps this is in part due to the one government activity unfazed by the government shutdown: the Federal Reserve's program of purchasing $85 billion worth of government bonds and mortgage-backed securities each month which has continued unabated for the duration of the shutdown. The debasement of our currency through inflationary, easy money policies carries on.
That, no doubt, has something to do with the fact that when Bloomberg polled 30 market analysts about the outlook for gold this week, 18 expected gold prices to rise, only 8 expected a fall and 4 were neutral.
10.3.13 - Treasury Sends Warning About Debt Ceiling
Gold prices lower Thursday as the U.S. government shutdown enters its third day. Stocks tumble after Treasury warns on debt ceiling. Gold last traded at $1,314. Silver last traded at $21.62 an ounce.
As most of the country remains focused on the ongoing political drama surrounding the so-called "shutdown" of the federal government, economists and financial analysts are looking toward another upcoming aspect of this same scenario, namely the raising of the debt ceiling.
Emergency measures arrived at back in May to hold the federal government under the debt ceiling are set to expire on October 17th. If something isn't done to raise the debt ceiling or otherwise extend emergency measures, there is a chance the US government could default on some of its debt payments. According to the Treasury Department, the result of no deal on the debt ceiling could potentially be catastrophic.
According to a report leaked to the media by someone at the Treasury department:
“Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."
Not surprisingly, the financial markets have reacted decidedly negatively to this report. US stock indices are sharply lower today. If the conditions described in the leaked Treasury report are accurate, there can be no doubt that investors would do well to add to their gold holdings as far ahead of the October 17th deadline as possible. A financial crisis in which the dollar plummets alone would require gold as a hedge, but when one adds in the other side-effects, such as plunging stock prices accompanied by plunging bond prices at the same time, gold could very well be the only safe haven. And such a scenario is not at all far-fetched, since skyrocketing interest rates force bond prices down sharply. For those who cling to the notion that rising interest rates are always negative for gold prices, we call your attention to the financial crisis of 1980-81 which saw the US prime rate soar to all-time highs at the same time the price of gold was setting new records as well.
Another problem that Wall Street and the rest of the financial world will soon be confronted with is a lack of current economic data. Because personnel at the Department of Labor have been furloughed due to the impasse on Capitol Hill, the usual data that the financial world watches closely to gauge future prospects and assess the current economic situation won't be available. Now, some might say the government data is of questionable accuracy and limited utility anyway, but there are still many key players who depend on data like the latest employment report. That very report is supposed to be released on Friday morning, however, barring an unforeseen agreement, there will be no employment report released by Labor tomorrow. The missing employment numbers will be the first set of data in a sequence of reports that may not get released. This could cause market participants to hesitate or even flee to the sidelines, especially as the October 17th deadline on the debt ceiling gets closer and closer with no official data upon which to base decisions.
Indeed, we face the prospect of entering uncharted financial territory.
Fortunately, gold remains a solid store of value and trusted medium of exchange during times of uncertainty such as these. Furthermore, a noted technical analyst reported this morning that the charts indicate gold is set to move sharply higher. Bill O'Neill of Logic Advisors sees gold prices rallying to $1,425 per ounce during the 4th quarter, after forming what he called a double bottom at $1,276 per ounce. So, the timing for accumulating additional gold holdings seems right at present.
10.2.13 - Swiss America Chairman Speaks On Government Shutdown
Gold prices rebounded Wednesday as the reality of the Federal government shutdown sank in. The debt-ceiling now looming on the horizon. Gold last traded at $1,320. Silver last traded at $21.90 an ounce.
MARKET NEWS HEADLINES
-Beware 'real, real scary deadline': Analyst - CNBC
-Obama, top lawmakers to meet over shutdown - Market Watch
-Gold Bounces Higher as US Shutdown Continues - ABC News
-Don't toy with the debt ceiling, bank CEOs warn - CBS News
-Obama to Wall Street: This time be worried - Yahoo! Finance
-Easing policy could be extended: Fed's Rosengren - Market Watch
Government Shutdown and Coming Debt Ceiling Battle Implications- Craig R. Smith, Chairman, Interview on Fox Business
Tuesday night, in an interview with Fox Business, Swiss America Chairman Craig R. Smith spoke on the most popular topic right now, the government shutdown. According to Smith, "If we go into this debt ceiling crisis not in accord with our bankers and not having everybody on the same page, we could see a world wide recession. The world is looking for leadership out of Washington and the President is going to hide behind the bankers, in my opinion."
Rich Edson, also speaking with Craig Smith during the interview, said he believed "in order to get either party doing something about these issues a market event, or some other event occurring that severely hurts one of the parties poll numbers, will have to occur." Treasury Secretary Jack Lew wrote yet another letter to Congress stating October 17th is the deadline. It is when government will run out of "extraordinary measures" to fund the U.S.'s debt and lawmakers need to work together to solve these issues soon.
If the debt ceiling limit is hit and the U.S. has to default, "then the market is going to take a major hit" according to Smith. Many fear that if the U.S. doesn't fulfill their obligations, the bond market will explode and the United States' credit rating will take a hit.
OTHER NEWS HEADLINES
U.S. Government Shutdown
Top headline of the week: the shutdown of the U.S. Government. Since Republicans and Democrats could not agree on a spending plan for the fiscal year (beginning October 1), the government was forced into a shutdown until these issues are resolved. During the shut down, some services are stopped but others, like active military and Social Security, remain operational.
One of the major issues surrounding the debate in Congress is the Affordable Health Care Act (Obamacare). The new health care law is being used as a bargaining chip by Republicans who oppose the law, saying it hurts employers and is an overreach by the federal government. If the shutdown lasts, the implications could be greater than just lost wages of those workers who were furloughed. A three-to four-week shutdown could cost the economy about $55 billion, according to Brian Kessler, an economist with Moody's Analytics.
Debt Ceiling Fast Approaching
The Treasury Department has begun using the rest of their "extraordinary measures" to allow the government to keep paying its bills until Congress raises the country's borrowing limit. In a letter to Congress, Treasury Secretary Jack Lew reiterated that if the debt ceiling is not raised by October 17th, the government will not be able to meet all its financial commitments. These commitments include such things as government contractors and Social Security recipients.
Lew urged Congress to act immediately because if the U.S. has insufficient cash on hand, America would fail to meet its obligations for the first time in history. President Obama recently stated he will not negotiate over the debt ceiling, arguing Congress needs to act. In his letter, Lew also stated the current partial government shutdown will not do much to push off the October 17 deadline.
U.S. Vets Storm Memorials
Veterans participating in the Honor Flight, a program that enables World War II veterans to partake in an expense-paid trip to view the WWII memorial, were forced to move barricades at the memorial in Washington in order to gain access during the government shutdown. These veterans vowed to make the trek to D.C. regardless of the situation in Washington.
9.26.13 - Fed Delays 'Day of Reckoning' as Predicted
Gold prices lower on better-than-expected U.S. weekly jobless claims. Second quarter GDP slightly weaker than anticipated. Gold last traded at $1,324. Silver last traded at $21.77 an ounce.
MARKET NEWS HEADLINES
-Commodity supercycle is ‘alive and well’: McKinsey & Co. - Market Watch
-Most Americans reject ‘clean’ debt limit increase: poll - Market Watch
-Debt Ceiling Drama: House Republicans Are Ready For a Fight - Yahoo! Finance
-Poll: Obama approval drops to 43% - CBS News
-President Raises Debt Ceiling Seven Times, Costing $43,000 Per Household -The Foundry
-Detroit Spent Billions Extra on Pensions - Deal Book
Fed Delays 'Day of Reckoning' as Predicted - Craig R. Smith, Chairman, Swiss America
For many months I have taken the position that the Federal Reserve would not taper any time soon. Mr. Bernanke did not disappoint on September 18th when he announced his foot is firmly on the gas pedal of printing and pumping.
The Fed doesn't actually print money. It merely creates it. Add a few blips to a computer screen and $85 billion magically appears on the books. Then those blips are used to purchase $40 billion in mortgage-backed securities and $45 billion in Treasury bills. Isn't that easy? No muss, no fuss, and no bother.
Unless of course one works for, saves, and plans for retirement in those dollars.
Bernanke has never once used the word “taper”. The pundits and talking heads have, but not the Fed chairman. He has only hinted at reducing the purchases. But for everyone else? Taper is the name of the game. And for good reason. Bernanke is a very smart man and should not be underestimated.
Lowell Ponte and I, in our book The Inflation Deception, put a hot air balloon on the cover with a label that said, “QE27”. It was our tongue-in-cheek way of saying there will be creation of money as far as the eye can see because our leaders refuse to deal with the real problems we have in our economy. These problems are not monetary in nature. They are fiscal problems. Simply put, we spend more than we earn.
OTHER NEWS HEADLINES
Second-quarter growth unchanged at 2.5%
The U.S. economy continues to grow slowly four years after the end of recession. According to the Commerce Department, the performance of the growing U.S. economy was unchanged at 2.5%. In the government's report they stated that companies restocked warehouse shelves a bit less than previously reported and exports also grew somewhat slower, both of which are negatives for gross domestic product.
Boehner Plans No Debt-Ceiling Deal Without Spending Cuts
Recently, President Obama has stated he won't negotiate with Republicans over raising the debt-borring limit. House Speaker John Boehner, on the other hand, believes President Obama will have no choice. With the debt ceiling set to be hit sometime in mid-October, the disput needs to be resolved quickly in order for the government to be able to pay its bills, or there will be a government shutdown.
At a recent press conference, Boehner stated that the Republican-controlled House plans to pass a bill that ties an increase in the debt ceiling to more cuts in federal spending. Currently, Democrats prefer to keep the spending at the levels they are at now. Unless the two parties can common ground, the government could run out of money as soon as mid-October.
U.S. jobless claims fall by 5,000 to 305,000
According to the Labor Department, new applications for U.S. jobless benefits fell again last week by 5,000 to a seasonally adjusted 305,000 in the week ended September 21. Originally, economists expected claims to rise to 327,000 on the assumption that California would catch up on a backlog of claims. The monthly employment report, due to be released next week, will give a better gauge or hiring and will help determine if the labor market is making progress.