Did You Read That Right? – The U.S Debt Limit Show
Come November 5th, the theatre of the United States Congress will once again stage the annual U.S Debt Limit show. However, unlike many award-winning shows on Broadway, this show is seeing dwindling interest from the audience.
The U.S Debt Limit is becoming predictably boring – the audience knows the outcome (as with re-watching many other Broadway shows) but does not get to enjoy any sentimental ballads, special effects lighting or world-class acting along the way. It is bereft of a stellar cast – only Treasury Secretary Jacob Lew and the two political factions.
The only change in the script is the level of the debt limit – an astounding USD 18.1 trillion this year, $17.2T in 2014, $16.7T in 2013. The audience gets it by now… the debt limit will only continue to go up despite all the political bickering.
The debt limit has been raised at least 74 times in the last five decades. The word ‘limit’ in the show’s title was obviously meant to be a sarcastic pun.
Despite the yawning effect of the script, the following publicly published alarming statements in the mainstream media should make us sit up and ask ourselves, “Did I read that right?”
The government will run out of money to pay its bills sooner than previously thought… Treasury Secretary Jacob Lew said the government would be left with just $30 billion cash on or around Nov. 5.
“Without sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,” Mr. Lew said…
In August, the Congressional Budget Office estimated the U.S. would be unable to pay its bills without an increase in the borrowing limit by late November or early December.
Source: WSJ - Treasury’s Lew Says Congress Must Raise Debt Limit by Nov. 5
Imagine if the above statements in bold describe someone you have lent some money to. You could not be faulted for rushing to bang on the debtor’s door asking for your money to be returned since it is highly likely that bankruptcy will soon follow.
Just in case if you think the $30 billion cash left is a big deal, Mr Lew never fails to point out every year that government outlays can be twice that amount on certain weekdays. When the government is left with pocket money that could be spent in a day, it is obviously broke.
With such an abysmal state of affairs, it is unimaginable how the U.S government can still be the issuer of the world reserve currency. With the link to gold severed since 1971, the value of the U.S dollar now rests solely on the confidence of the very government that is now bankrupt.
Today, the mainstream news tells us that the U.S dollar is strong and precious metals are weak. This is a very short-sighted view that discounts the alarming growth of global debt that no one has a solution too. Debt levels are in the trillions, a figure too large for many to comprehend and find effective solutions.
Despite the much touted depressed outlook on precious metals, it is undeniable that USD 35 was enough to obtain an ounce of gold in 1958 but the same weight of gold would cost you in excess of $1000 USD today. The amount of value lost in the U.S dollar versus precious metals is a gulf that is unlikely to be bridged if the only solution to debt is to repeatedly raise the borrowing limit.
With the outcome of the coming debt limit debacle almost certain, let us think about how we want to store our wealth. Do we want the fruit of our productive labour to be held in fast-devaluing currencies or in time-tested precious metals that have always been an excellent store of value?
The choice is obvious if we read our news right.