Just thinking out loud

Justacommeman

The US will hit their debt ceiling on or around May 16th

1) If the debt ceiling is not raised the US will default on all debts. No doubt the stock market crashes and Treasuries go next to zero and interest rates sky rocket. It would make 2008 look like childs play.The Fed could support Treasuries until about July 10th through artifical means until they exhaust all resources in their arsenal. Game over. The US as the gold standard of debt would end.

2) if the debt ceiling is raised for the 4th time in the past year or so the dollar should weaken even more, the stocket market rally should continue and Treasuries should get a boost.

Q- Isn't this bullish for pm's either way?

Discuss.................MJ

RedHerring

Looks bullish to me. They might as well raise the debt limit to $16 trillion now, so they don't have to come back before the 2012 elections. It's a mess in D.C. and the whole financial system is still upside down but being allowed to report otherwise. Very bullish for PMs but there will certainly be some dips along the way to $2,000 gold and $100 silver.



Edit: Billion to Trillion

Wingsrule

My only addition would be under scenario #1, everything would get hit badly short term, including PMs, as the baby gets thrown out with the bath water. But I would expect that to be relatively short-lived.

dontippet

<< <i>
2) if the debt ceiling is raised for the 4th time in the past year or so the dollar should weaken even more >>



Are you sure about this? If I remember correctly, the dollar has hovered around 75 for a year or more.

gsa1fan

#1 or #2 either picture is not a good one. America has painted it self in a corner.

Are there walls or cliffs that make the corner?

I see strong PM prices for a good long while.

Moxie

Yes, either option is bullish for PMs.

The only way I see the bear creep into PMs is if the federal government introduces strong austerity with your option 2. But obviously this is extremely unlikely.

sbeverly

I would think that either situation would be bullish for the metal's.

In the first scenario there might be initial downward pressure due to the tendency to sell everything and the proverbial kitchen
sink during a panic situation such as you describe.

The debt ceiling raised in the second situation describes business as usual, which means that the metals continue their march up.
Given the choice, the second situation is the probable pick, because historically politicians will always take the political road.

gsa1fan

I don't really see the first as an option current conditions, if ever in my life time.

Unless the lenders cut the cord now I see that as a possibility.

TheBigB

I think this applies to our situation.



<< <i>Would you like to shoot me now or wait 'til you get home? >>



-Rabbit Seasoning

Justacommeman

<< <i>

<< <i>
2) if the debt ceiling is raised for the 4th time in the past year or so the dollar should weaken even more >>



If I remember correctly, the dollar has hovered around 75 for a year or more. >>



The dollar was at 80 last year at this time. It actually hit 88 in June. It's below 75 now.

WR, in scenario 1 you maybe correct. Intially most everything would sell off. However, if the US were to default I think eventually it would send pm's into orbit.

I fully expect we will get scenario 2 and the debt limit will be raised. Likely at the last minute. That means the proceeds for Treasuries can continue to go right back into the US stock market. Financed of course by the US tax payers since the US is buying it's own debt at this point. Wash, lather, rinse. Weak dollar, higher stock marker and a floor under pm's............JMHO. MJ

streeter

The gubbermint has to start generating more revenue faster than the debt is expanding, if that makes sense...or the debt just keeps expanding.

HHHMMMMMMMM...I wonder how they are going to do that????

25% of the people already pay all the taxes in this country......and they may need to pay more.

I'm ready to work for the govt now. That way I don't have to think about producing anything. Just provide a service for the 75% on the gravey train.

Between the ages of 20-50, there should be NO ONE working in the GOVT who wears a tie. You work for UNCLE between 20-50, you get your fingernails dirty. There's a mighty large population of people between 50-70 that can manage very effectively and are underemployed.

That way no one retires until they are 71. There's your SS fix.

derryb

A slow default has been in place since FED begain to slowly devalue dollar on purpose. Debt ceiling will be raised as necessary, always is. Washington's credit card is endless, just not all at once. What surprises me is that debt holders (China and Japan) don't follow Bill Goss's lead and dump US Treasuries before they become more worthless. I suspect they are slowly reducing their holdings and trying to be stealthy about it.

I like Ireland taxpayers' approach to their similar problems. They may well be the only sane population on the planet.

jmski52

The debt load, PLUS unfunded liabilities & entitlements, PLUS the overhang of value-less banking derivatives = no way to recoup without default.

The more that they try to muddle through without actually calling it what it is, the higher metals will climb.

They've already destroyed the accounting standards, and there is no accountability.

At some point, everyone in the theatre will notice that the doors are pretty small and that the fire has started climbing up the curtains.

No doubt, China and Japan are being told "We'll make it good to you, no matter what", and unfortunately the problem just doesn't go away by wishing it so.

Knowing our government, they will probably start holding a weekly raffle. I wonder how much we could get for Hollywood?

rpw

Are there walls or cliffs that make the corner?

I'm guessing cliffs.

secondrepublic

Debt which cannot be repaid, won't be repaid -- or will only be repaid in inflated dollars. That's not a prediction, just a statement of fact.

BBQnBLUES

Sure GLAD I cashed in those "savings bonds" given to me for graduation years ago B4 they become "obsolete currency" !

57loaded

i think the gold and silver are reacting today to the same scenarios?

now i'm thinking even a suppression of QE will not have an affect.

1) will most likely NOT happen, IMHO

Moxie

Looks like most people here agree that option 2 is most likely. But what happens after that?

China trims holdings of US securities in Feb

I see fewer countries purchasing our treasuries. Maybe even more selling them. Eventually all the inflation we've been exporting will be bottlenecked her in the U.S. Huge push upward for PMs.

storm888

.

Whether or not the ceiling is raised, the govt has FAR more than
enough income to service the existing debt.

Other "services" might have to be cut, but the interest on current
debt will be paid.


.........

I am now pretty sure that PMs will continue upward - with only
moderate pullbacks - until the "news" that is driving their current
momentum gets "better."

ProofCollection

Keep in mind that I heard that the fed can play some accounting tricks and actually keep things going without defaulting until mid June...

storm888

Since the US govt collects between $166-and-$200-BILLION+ in income-tax
revenues EACH month, it is not possible for them to be "forced" to default
on ANY of their debt servicing obligations.

They could simply stop spending money on some other items.

Justacommeman

<< <i>Keep in mind that I heard that the fed can play some accounting tricks and actually keep things going without defaulting until mid June... >>



<The Fed could support Treasuries until about July 10th through artifical means until they exhaust all resources in their arsenal>


Exactly what I was alluding to..........MJ

Konahead

I agree, there is no way they will not raise the ceiling. They are in deep do do no matter what they do. Everyone is already feeling the heat every week when they buy food or fill up the tank. This is just starting as other prices rise for the remainder of this year. When you see the light at the end of that long dark tunnel it is really the uncoming train. I just don't see anything that is going to make the general public or investor feel safe or that things are getting better. Call in Harry Potter, maybe he can fix it.

Baley

How is it possible to have continued general price inflation on everything, without concomitant wage inflation?

And how can you have wage inflation when the % unemployment is so high?

cohodk

<< <i>The US will hit their debt ceiling on or around May 16th

1) If the debt ceiling is not raised the US will default on all debts. No doubt the stock market crashes and Treasuries go next to zero and interest rates sky rocket. It would make 2008 look like childs play.The Fed could support Treasuries until about July 10th through artifical means until they exhaust all resources in their arsenal. Game over. The US as the gold standard of debt would end.

2) if the debt ceiling is raised for the 4th time in the past year or so the dollar should weaken even more, the stocket market rally should continue and Treasuries should get a boost.

Q- Isn't this bullish for pm's either way?

Discuss.................MJ >>



The underlying premise is what I dont agree with. If I reach the limit on my credit card, I have not defaulted on anything. I just cant spend more on credit. Thats a good thing. The G could balance the budget and pay off all debt very easilly. It just chooses not to. They are hoping "time heals all wounds".

percyb

<< <i>The US will hit their debt ceiling on or around May 16th

1) If the debt ceiling is not raised the US will default on all debts. No doubt the stock market crashes and Treasuries go next to zero and interest rates sky rocket. It would make 2008 look like childs play.The Fed could support Treasuries until about July 10th through artifical means until they exhaust all resources in their arsenal. Game over. The US as the gold standard of debt would end.

2) if the debt ceiling is raised for the 4th time in the past year or so the dollar should weaken even more, the stocket market rally should continue and Treasuries should get a boost.

Q- Isn't this bullish for pm's either way?

Discuss.................MJ >>


I think so, although it may be the case that PMs get hit by liquidation as well. But after any initial liquidation, PMs rise.

percyb

<< <i>

<< <i>

<< <i>
Intially most everything would sell off. However, if the US were to default I think eventually it would send pm's into orbit.

I fully expect we will get scenario 2 and the debt limit will be raised. Likely at the last minute. That means the proceeds for Treasuries can continue to go right back into the US stock market. Financed of course by the US tax payers since the US is buying it's own debt at this point. Wash, lather, rinse. Weak dollar, higher stock marker and a floor under pm's............JMHO. MJ >>



I concur. Commodities of every stripe continue to rise as well, including fish eggs. Poverty sucks!

percyb

<< <i>
I'm ready to work for the govt now. >>



You already do. As a matter of fact, we all do. Ugh

Justacommeman

<< <i>

<< <i>

Q- Isn't this bullish for pm's either way?

Discuss.................MJ >>



The underlying premise is what I dont agree with. If I reach the limit on my credit card, I have not defaulted on anything. I just cant spend more on credit. Thats a good thing. The G could balance the budget and pay off all debt very easilly. It just chooses not to. They are hoping "time heals all wounds". >>



Not the same, but I think you know that

MJ

cohodk

Its not the same cuz we (the G) dont want it to be the same.

Anyway, the USA probably has assets that can be measured in the 100's of Trillions. We (the G) just needs to determine if they are worth holding to. You know, there is a reason why we use others' oil, rare earths, labor, ect.


But to respond to your thinking, yes, if we continue to build liabilities at a faster rate than assets, the US dollar could depreciate against PM's. But in all honesty, I think we worry about this much more than we really need to. The USA is not going to turn into a 3rd world country. We are simply a country that spread itself too thin. Now other countries will come to America seeking relative value. Hey, America is on sale. When this is over, foreignors will own more of the USA than they did before. Big deal. The USA will still rule the seas, the air, and space, and hopefully other countries will contribute more to the safety of all Earth's people.

roadrunner

<< <i>How is it possible to have continued general price inflation on everything, without concomitant wage inflation?
And how can you have wage inflation when the % unemployment is so high? >>



Because all that money being printed and keystroked into existence around the world is targeting things that have historically gone up in price during stressful times like this:

food-energy-precious metals-dwindling natural resources-key consumer items and services-selected areas of the stock market.

General wages aren't considered in the above. The liquidity isn't being invested in businesses as a rule unless they are in one of the above sectors. So if your wages are being
paid in govt, manufacturing, leisure and entertainment, durable goods, transportation, etc. they probably aren't changing. Plus you have a lot of people fighting over a
dwindling number of jobs. No reason for an employer to raise wages when the business is making less money and they have 100 applicants for 2 openings. Same thing happened
in the 1970's as tangible assets were bid up while real wages peaked in 1973.

There isn't really price inflation on everything right now. Cars, clothes, durable goods, boats, planes, machinery, homes, computers, trash removal, etc are all seeing steady or falling prices. Today's hot money wants a fast and large % return for their speculative buck. And they're not going to get it by investing in businesses and wages for the longer haul.

roadrunner

RedHerring

<< <i>...The USA is not going to turn into a 3rd world country. We are simply a country that spread itself too thin... >>



For half the country, they won't know the difference. May not be a 3rd world country but half of all Americans will be living like they are in a 3rd world country very soon.

jmski52

It's my observation that government spending priorities change, but cutbacks never happen. The only way to do that is to leave the "out of favor" budgets alone, while jumping on the "hot priorities" gas pedal with both feet.

Every time the political pendulum swings the other way, all of the new spending increases in favor of the new ideologies without cutting the "old and out of favor at the moment" programs. So, if welfare spending is 10% of the budget at $100 billion, the best way to increase it to 15% is to leave everything else alone, add $6 billion to welfare spending and to raise total spending to $106 billion. Voila! Welfare spending is now at $16 billion (or 15.1% of the budget) and nobody had to take a hit. And only $6 billion extra had to be created.

That example would devalue the dollar in your pocket by about 5.6% automatically. Better than taxes. Nobody has to be accountable.

Now you know why a hotly negotiated $38 billion in "reduced spending" only equals $362 million in actual cuts or some such nonsense. More political gobbledegook and doubletalk.

Keep stacking. Nothing has changed.

dpoole

As for me, I would take all my PMs and throw them in the trash if the government would honestly and forthrightly address the deficit, the reality of globlization and our different and inevitable change in international economic status.

Barndog

<< <i>As for me, I would take all my PMs and throw them in the trash if the government would honestly and forthrightly address the deficit, the reality of globlization and our different and inevitable change in international economic status. >>



and as for me, I would gladly dumpster dive in your neighborhood if you carried out your plan based on an "announcement" to that effect.

TheBigB

<< <i>As for me, I would take all my PMs and throw them in the trash if the government would honestly and forthrightly address the deficit, the reality of globlization and our different and inevitable change in international economic status. >>




The government knows what's happening, they want it to happen.

Bear

There are large swaths of the Nation, even in L.A., where the where the living conditions

are about as bad as the old Tobacco Road. While many of these areas are composed of

illegal aliens and minorities, we also have a fair share of such depressed ares populated

by white folks and native American Indians. How this may impact PM prices is due to the

growth of the truly poor and the increasing gap in wealth between the middle class and

the hoity toity folks. The poor pay no taxes, the rich and Corporate entities do not actually

pay the stated tax rate, but in fact pay much less, that is if they pay anything at all.

The use of off shore tax havens, hollow corporations and complex and torturous tax loop holes

allow the well to do shelters to protect profits and earnings from their fair share of taxes. That leaves

the middle class to do the heavy lifting. If things go forward as they have in the past, programs will be

scaled back for the poor,sick and aged, as well as the middle class. Taxes will go up on paper, but the well connected

will squirm free as usual.



While decline in the dollar continues, the value of PMs will indeed go up. The question is this, will working folks

have the discretionary income or reserves, that will allow them to keep stacking? What happens when circumstances

and economic pressures start the process of unstacking? A weak recovery and anemic job growth do not omen well for

the next few years. You want a balanced budget, then cut subsidies to giant agribusiness as well as giant profit swollen

corporations, create a VAT consumption tax exempting food, drugs and housing. Close offshore tax evading schemes. reduce

future benefits in medicare and Soc Sec. as well as age qualification increases , over a reasonable period of time.

Place a freeze on the wages and benefits of members

of congress and their staffs for three years, as a show of solidarity with the people that they represent.Will these things happen?

How much you wanna bet that most, will not?


All we have left is to keep stacking and keep a supply of those nasty, dirty, depreciating greenbacks handy.