$2 Trillion Mile Marker on Road to Perdition

By Greg Hunter’s USAWatchdog.com

This week, Treasury Secretary Tim Geithner proposed raising the debt ceiling by $2 trillion.  I thought, this should be big news!  After all, a trillion is a thousand billion.  This adds up to 2 thousand billion over the next 2 years!!  The mainstream media greeted this story with a great big yawn. I do not get that because the Republicans and Democrats fought for weeks to only cut the budget a measly $38 billion.  The press was non-stop, and Congress was only an hour away from shutting down the government.  Even the $38 billion cut was a big fat lie according to CBS News.  The story said in mid-April, “Well, thanks to the Congressional Budget Office and some great reporting by the Washington Post, it turns out the government won’t be cutting $38 billion in one year after all. No, the real cuts will be more like $352 million!  You heard me right, $352 million, NOT $38 billion.  The rest? Mostly smoke, mirrors and accounting gimmicks.” (Click here for the entire CBS News story.)

Both parties want to cut roughly $4 trillion out of the budget over the next 10 to 12 years.  Can someone please explain how that is accomplished by tacking on another $2 trillion to the national tab?  I do not get the math and neither does Bill Gross, the head of the biggest bond fund in the world.   He said in early January, “We have a deficit in the $1 trillion plus arena, which means we must borrow at least a trillion dollars additional a year in order to fund the deficit.  And, so, the debt ceiling currently at $14.3 trillion, which is 95% of GDP, has to go up by another trillion or so every 12 months.” (Click here to read my original post on the debt ceiling.) Not long after Gross made this statement, he sold most, if not all, of his U.S Treasuries.   What do you know?  He was right on the money.  The proposal from the Treasury is a $2 trillion increase in the debt ceiling to cover most of the next 2 years.

You see, it’s not just the Treasuries he’s worried about, but the currency he will be paid back in.  A Treasury bond pays interest.  Investors buy them, if they think they can get paid back enough dollars to offset inflation and make a profit.  Mr. Gross is betting the dollars he would get paid back would actually be worth less when the bond matures, and thus he holds very little U.S. government debt.  In a recent article, he said, “I spoke last month to the reality of investors being “skunked” and having their pockets picked simply by receiving yields less than inflation, and suggested that as a major reason why the PIMCO ship was carrying a limited supply of Treasuries on board.” (Click here to read the latest post from Bill Gross.)

The debt ceiling currently stands at $14.3 trillion and word is we will exceed that amount by August (although some say we have already exceeded it).  Reuters reported this week, “Geithner said he could avoid default until August 2, but repeated his warning that a failure to raise the borrowing cap would have a “catastrophic” impact on the economy. . . .If the debt ceiling is not raised, investors may fear that the United States could not repay its loans and so would sell U.S. government bonds. That would drive down bond prices and force the United States to offer higher interest rates to make its debt more attractive to lenders — a move that would lead to a dangerous spike in interest rates throughout the economy.” (Click here for the complete Reuters story.)

But, Mr. Geithner may have another reason for the big debt limit increase.  It is continued back-door bank bailouts!  Earlier this year, Geithner forgave Bank of America $127 billion in possible buy-backs of toxic mortgage debt packed into government owned mortgage giant Freddie Mac.  (Click here to read more on this story.) What do you bet the other big banks want the same deal?  What they should be getting is investigated and indicted for ripping off the American taxpayer.  Not a single financial elite has gone to jail for causing the $12 trillion meltdown of the economy and causing millions to be foreclosed upon.  The U.S. Justice Department cannot find a single crime in the entire financial debacle, but Wall Street banker bonuses keep getting bigger.

Raising the debt cap by $2 trillion will be granted to Mr. Geithner.  That’s about all that will get done because if Congress can’t even cut $38 billion, how can it cut $4 trillion?  (That’s 4 thousand billion.)  It can’t—the cuts will never materialize.  America will just get more and more inflation as the dollar is printed out of thin air to cover the cost.  There is no way this ends well.

Comments
  1. Sarkis

    With all these uncertainties as you described it’s unbelievable to witness a dramatic gold sell-off today.
    Why would anyone sell their Gold?

    • Greg

      Sarkis,
      This is part of the trading cycle. This is probably hedge funds wanting to make some money. It is also dark powers wanting to keep the fiat currency game going. Thank you for your comment.
      Greg

      • Art Barnes

        Well put and more than a possibilty, a strong probabiltiy as to the correction in gold, silver, & oil. Just wait it out, it has to rise with the devalution of the paper money – 2 trillion more on top of the allready 14 trillion or so debt is another 10 or twenty percent or so of devalution of the paper currency. Look for commodities to go up another 15 percent or so in the next two years when they raise the debt ceiling up 2 trillion dollars; because that is what the percentage of the devalution of the dollar will be during that period of time based upon the added debt.

    • myth buster

      Because they bought commodities on margin and had to cover. As much as they may want to hold onto gold, if they need cash before the close of business, they need to sell whatever they have to come up with the cash.

    • clark

      No gold or silver was actually sold.
      Only paper promises representing physical gold and silver were sold. However, there is no actual physical gold and silver behind those paper promises. That information will be widely know in a year, when the paper markets collapse, and everyone demands actual physical metal.

  2. alex west

    ###
    The proposal from the Treasury is a $2 trillion increase in the debt ceiling to cover the next 2 years.
    ##

    bulshit.. where did you get it ?

    this is exactly what is wrong w/ USA.. so-called journalists cant even report simple facts w/out lie, distortion and numbers checking..

    #1
    Treasury said ‘to fund outlays until end of 2012.. that’s 1 and half year,, not 2..’

    #2
    USA issues +-150 bln new debt per month, so 2 trln will cover only a bit more than 1 year, so next june/july 2012 treasury will ask for more 2trln..

    problem is in 2012 there will be next president elections, so
    Mr Obama would like to skip new debt limit debates before elections in 2012, but in this case Treasury would need to ask at least 3 trln to cover end of 2012.. of course it would be outrage, so here’s spin only 2 trln but until end of 2012..

    #3
    that’s how reporter need to write article

    good luck , soon unemployment sucker
    alx west

    • Greg

      Alex,
      I stand corrected but I did not lie.” I actually should have said “most of the next 2 years based on a Reuters story. Here’s the quote “But when lawmakers asked how much of an increase would be needed to meet the government’s obligations into early 2013, Treasury officials floated the $2 trillion working figure, Senate and administration sources told Reuters. I revised the story. Thank you.
      Greg

    • Kevin

      #4

      Dear God alx west…take a step back from the coffee.

      good luck , soon decaffeneited sucker

  3. Brent

    Somehow, inflation has suddenly reversed. Oil now sits at $96 a barrel and RBOB gas is down 38 cents for the week as I write this post. My gold and especially silver got absolutely killed this week. I can not believe I am say this, but I now think we are going back into deflation. It does not make sense with all the reckless money printing, but it is happening regardless.

    • Greg

      Brent,
      Interesting isn’t it. Thank you for the comment.
      Greg

    • FamilyForce6

      Inflation is “always and everywhere a monetary phenomenon”. The LDS canneries are reporting 11%-49% increase in prices for the first 3 months of 2011! Thats 44%-200% annual price inflation on basic food stuff!!! Sysco foods and Walmart have already stated that “significantly” higher prices for food will be here in Fall of this year.
      Don’t buy the deflation myth (though stagflation is certainly a possibility). Stock up now on what you can, it’s starting to get crazy. It’s funny to hear the Fed talk about managing “inflation expectations”, that sounds like PR and advertising, not economic policy. Whatever the Fed or US Gov’t says they’re going to do you can almost always bank on them doing the opposite. Buy silver, gold if you can, and stock up on food… also most importantly, make sure your spiritual house is in order.

    • Art Barnes

      Its just profit taking, hold on, its going to go back up. The hedge funds are making some money and dumping their interest. They will buy back shortly when some other fools sell of their interest. They know what they are doing, just hold your positions and watch them go higher in the long run. Don’t sell short, with more printing there is only one way for commodities to go – UP!

    • myth buster

      It makes perfect sense, because it’s all artificial selling. CME raised the margin requirements on silver. Ergo, people who bought silver on margin now need to sell to come up with the cash to cover their margin requirements, so they sell whatever they can to come up with the necessary cash. Also, oil consumption is down.

    • Cramer

      Brent,

      DEFLATION = DEBT FAILURE = MONETARY EXPANSION

      Need I say more?

      Hyperinflation = A currency event brought on by a collapse in business activity, offset by QE (quantative easing AKA printing of money)

      Are you getting the picture, regardless of what MSM tells you?

    • Tim

      Relax. The reason for the drop in Silver was the triple increase in margin requirments (From roughly aprox. $5900 to roughly $22000. per contract. (5000 ounces of Silver). So that would mean if you had a budget (who doesn’t?) you would need to sell some of your positions to keep up with the margin.
      The inteesting thing is the rise in Silver prices AFTER the increases. Pepole still seem to be buying, either contracts or metal. They must still feel it’s worth it.
      It SURE isn’t the fundamentals. they remain the same, or worse.
      The trend continues… pick a bottom and BUY….
      ;-)

  4. Dr. Zook

    The entire concept of “raising the debt ceiling” is an absurdity. It’s like sitting down at a poker game and saying to yourself, “I’ll stop playing if I lose $50.” Then after you have lost $50 you decide, “Well, I’ll only play until I lose $100.” Then after you have lost $100 you say to yourself, “Well, I’ll only play until I lose $200,…”

    Hell man, why not just sit down at the poker table and decide to keep playing until you have bet the car, the house, the bank account and the dog, i.e. until you are flat broke!?

    For a nation to create a “debt ceiling” and then keep revising it upwards as the national debt increases is just as insane. When exactly is the country planning to pay off the debt?

    • Diane Carol Mark

      Dr. Zook and Greg,
      There’s a very famous narrative, The Mahabharatha, in which one of the main characters the eldest Pandava brother, Dharmaraja, has one fatal flaw: he’s a gambler. But, he’s not an ordinary gambler. During the epic, he falls deep into the trance of the ailment by gambling away first his wealth (as a member of one of the royal families, this was significant), his wife, his brothers and having arrived at the ultimate state, he has nothing left so he gambles away himself.

      The epic continues–this is certainly not the end at all. I’ll leave it to you to inquire and read the story. One of the best films created is by Peter Brook http://en.wikipedia.org/wiki/The_Mahabharata_(1989_film)

      It leads us to the realization that when ailments particularly psychological become out-of-control, they can become all-consuming. Since we have a tendency or propensity to learn only in the throws of crisis, it may very well come to that. The good news is, endings always lead to new beginnings, and certainly that is a refreshing thought.

      :) Diane

    • Art Barnes

      Never is the answer, except with dollars not worth the paper they are written on. A.B.

    • Hal

      … in a sense, you have answered your question – i.e.: they ALREADY HAVE “bet the car, the house, the bank account and the dog, i.e. until [WE] are flat broke!”

    • Tim

      They aren’t. Obvously.
      Think of it. If you KNEW the economy was going into hyperinflation, wouldn’t you max your cards, loans, debts etc and BUY things that coud be sold for huge profit? You could then pay off a portion of what you owe to surviving debtors, meanwhile you could stock up on the necessities of life to tide you through the inflation period until the time comes to begin the business cycle again.

      A Credit/debit card frugal squirrel
      8)

  5. Reader

    ” The unavoidable trend is the ultimate downfall of the debt-ridden U.S. economy and a massive recalibration of this nation’s economic behavior, which may or may not include the dissolution of the nation itself. American may somehow survive this unprecedented debt crisis. Then again, it may not. ”

    Mike Adams
    Naturalnews.com

    I still say that Martinarmstrong.org has all the answers – so read up!

    • Hal

      To settle for allowing the DEBT CRISES to define the outcome, in re the resultant national profile after this consummate exercise in diabolical avaricious greed, is to have the tail wag the dog!!! … Within “The unanimous Declaration of the thirteen united States of America” of 1776, coupled with the subsequent – AND SUBORDINATE – 1791, Preamble named “… Constitution FOR the Untied States of America.”: We the People have the most saliently created, and greatest proven system of governance in the history of Mankind – that is until, THAT SAME “We the People” ABDICATED our Polygarchy Political Powers sovereignty to the highest bidder in the arena of collectivist largesse!!!

      Those documents are STILL the Supreme Law of this Land IN THIS COUNTRY!!! … We the People are STILL the Polygarchy Political Powers sovereignty AND “Party of the First Part”, to whom those Covenant Contracts RUN!!! … JUST HOW LONG WILL IT TAKE US TO PICK-UP THOSE CONTRACTS AND BEGIN TO ENFORCE THEIR TERMS – AS We SHOULD HAVE BEEN DOING FROM 1861 – TO DATE?!?!?

      Simper Fi, and God Speed
      Hal

  6. Tom H

    I remember when I was a kid, if a billion dollars was mentioned on the news, it was an inconceivable amount of money. Now we talk about trillions like they are chump change. So here is a little lesson on how much a billion dollars is: If a corporation was begun on Day 1 A.D. with a billion dollars in capital, and it was such a bad company that it lost one thousand dollars every day it existed, that company would still be in business today and would not run out of money for another 729 years. It is a lot of money.

    The government produces nothing of value, and therefore, every penny they spend must first be taken from someone who produced something of value(earned it). 16.3 trillion dollars. If the american people were to pay this back at $1 million dollars a day without interest or adding to it, it would take us over 44 thousand years to pay it back.

    If these numbers seem insane to you, it is because they are. It is my belief that the people who did this to you are also insane, criminally insane. Who did this to you? Democrats and Republicans. If you are having trouble comprehending these numbers, you should never, ever vote for a republican or a democrat again.

    Who should you vote for? Any candidate that wants to get rid of debt based money and give the American money back to the people, as our forefathers intended. The Constitution says that only gold and silver are money. It really does, read it!

    • Greg

      Thank you Tom and Phil.
      Greg

    • Art Barnes

      Tom H.: Well, once again I am out of my chair and clapping so hard that my hands hurt; thank God for people like you who have a clue. A.B.

  7. phil fleming

    Greg
    What do we do now. Is there any real time predictions of how this plays out. We’re on the Titanic and the Obama shell game of disinfomation and distraction is working while very few passengers are heading to the lifeboats. Our country and citizens can not be this stupid. When the MSN reports good tidings and smooth sailing ahead, all we have to do is look around. Jobs are down, inflation is high, gas is killing us at the pump and our youth has no hope. My business in the home improvement field is dead. There is no money to apend. People have no confidence in this economy when their neighbor is loosing their job and yours os questionable. Why are paople so willing to wear blinders at a time when preperation is so important.

    • Art Barnes

      Frankly, people are that stupid or else we would put a stop to it. I am soryy, but the vast, vast, vast, vast & vast majority of american are really, really, really, that stupid. A. B.

    • Tim

      “Greg
      What do we do now. Is there any real time predictions of how this plays out. We’re on the Titanic and the Obama shell game of disinfomation and distraction is working while very few passengers are heading to the lifeboats”

      Never mind… you get us seats, I’ll get the popcorn, drinks and lifejackets… meet you at the lifeboat.
      Hurry… don’t be late.

      • Greg

        Tim,
        You are pretty funny. I like your attitude. Thanks for all the comments.
        Greg

  8. Art Barnes

    “There is no way this ends well” is an understatement. The players your alluded to, the Treasury Secretary, ect., certainly live on this planet don’t they, so know what is at stake. They know the consequences of such reckless debt and yet they march right on as though this is a normal transaction and good for the economy overall. That is why I believe this is a conspiracy to devalue the dollar and turn this country into third world status where only a few, the Secretary as one of them, will be extremely powerful, wealthy, and one of the world’s elite.

    Greg, there is more power in a facist and or dictatorial type regime than a republic. I used to be a misguided naive individual who thought the best of the worst of them, that they were simply interest minded and a little bit crooked, making a little for themselves while trying to do some good for the public at large. The last 10 years or so I now do believe there is an actual agenda to bring the middle class to extintion thereby changing this country to the benefit of the elite. They now have the media behind them as you pointed out that the raising of the ceiling is a non story. So, if the american people are too stupid to stop it then I guess will just have to board the trains when they tell us to.

    I did predict if you recall that the Speaker of the House was doing lip service a while back about cutting spending and then a deal would be struck for a trillion dollar raise, I didn’t predict it would be 2 trillion, with the media looking the other way why not get more now as they will be raising it ever year or so in any event. The jest of this diatribe is this: There is no way out now, the american people have sit on their backsides to long and they got us, whether we like it or not.

    • Greg

      Thank you Art for adding to this post.
      Greg

    • Tom H

      Art, there is a way out. You can choose not live in their system or by there nefarious code. The first thing we need is for everyone to get their money out of TBTF banks and support local banks. The second thing is for people en masse to reject fake paper slave notes and trade them in for gold and silver as often as possible with whatever you have left over.

      I would also love to see a good old fashioned tax revolt. If the American people understood that inflation is a hidden and insidious tax, they would have already revolted. We are many and they are few. Don’t vote for establishment candidates.

      Don’t fly! If every American stopped flying for two weeks, the whole decimation of the 4th ammendment at the airports would stop.

      Don’t be fooled by the whole energy scarcity fear tactic. It is ridiculous as energy is the most abundant thing in the universe.

      Don’t be fooled by the word terrorism, it is just a word meant to scare you so you will willingly give up your God given rights.

      Grow your own food. It’s better for you anyway. Certainly better than poisoning yourself with Monsanto Round up resistant, GMO, terminator seed bullshit.

      Don’t watch the news! Nuff said.

      The best advice is don’t rely on the establishment. Live your life and be happy. Self sufficiency and the power to create breed happiness and fulfillment.

      They will not succeed. Americans will rise up once they are hungry and that day is coming much sooner than most people think. Godspeed Art Barnes. Keep the faith, people like us will find each other when the time comes.

  9. David B. Collum

    That’s only $20,000 per legitimate taxpayer; no problemo. We can worry about procrastination next year.

    • Greg

      David,
      Thank you for working out the math on this. Your analysis is frightening but spot on!
      Greg

  10. Bill O'Malley

    Gregg, Bill Gross is a bond salesman. So, he naturally joins in the chorus that calls Tsy Bonds debt. This term “debt” suggests an intention of the issuer to some day pay it off. Tsy Bonds have never been paid off nor will they ever be paid off. They are “rolled over”, which means when they mature they are replaced with new “borrowing”. Now the new bonds have very low interest rates, so their cost to the Government is negligible. In reality the issuance of Tsy Bonds is only a step away from just printing up more dollars, which Mr. Bernanke, the Tsy, the Fed, and some members of Congress fully understand. The term “raising the debt ceiling” is a way our government prints more dollars, but most people don’t understand what’s going on. Bill

    • Greg

      Thank you Bill for the excellent analysis.
      Greg

    • Hal

      … shouldn’t that “Tsy Bond” be more correctly stated as “Toy Bond”?!?!

  11. Richard

    Greg,

    Always appreciate your telling of the truth.

    This is like extending credit yet again to an individual who has maxed out 10 credit cards and can no longer afford to pay the interest or minimum payment…only a trillion times worse!

    What angers me the most about such irresponsible action is that it will have dire financial consequences for our children, their children and their children’s children…ad infinitum.

    Its only a question of when, not if the rest of the world wakes up one day, realizes the US financial system is nothing more than the ultimate house of cards, and finally shuts off the spigot of lending. Then what??

    • Greg

      Thank you Richard for the comment.
      Greg

  12. Jim in GA

    It really doesn’t matter if we do away with the “debt ceiling” alltogether. I used quotes because the debt ceiling is a myth…if it can be raised at will then it is no ceiling at all. More importantly, our debt is now so large it cannot be solved by any conventional means. We will either default (real default, not Geithner’s version) or experience hyperinflation. Some say both are beginning right now. Either way, we are doomed to return to the 19th century standard of living. After that, maybe we can start over and get it right this time

    • Greg

      Jim and Roger,

      Thanks guys for the comments and support!
      Greg

  13. Roger

    We are being lulled into being the frog in the pot. Our economy is in such big trouble. And these fools in Wash. just keep going on! They make me sick! All of them!
    R

  14. David Conrad

    Right on again, Greg.

    How long can we survive just by printing money? How long can we survive by just cleaning each others houses, selling each other insurance, and other service related endeavors, while not producing anything? It appears to me that the powers to be simply want us to be more like the debt starved European states …. with their socialist agendas.

    I agree … even though I approach life as an optimist, I see no end in sight. Keep up the great work that you are doing. Somebody has to!

    • Greg

      David Conrad,
      Nothing wrong with being an optimist you just have to have some protection. Thank you for your comment and being a very good friend!!!
      Greg

    • myth buster

      Reports of the demise of US Manufacturing have been greatly exaggerated. Truth is, the output of the US Manufacturing Sector is greater than all but about ten COUNTRIES. Sure, it’s not nearly as big a component of the US economy as it used to be, but it’s still huge in its own right, and this is without counting farming, fishing and extraction industries.

  15. nm

    I understand that silver went down precipitously because the CME was “forced” to raise margin requirements and those who couldn’t afford the new higher margins were forced to sell & once sold, they couldn’t afford to get back in (because again, those higher margin requirements locked them out) only the big boys with the big money can now buy silver ETF’s.

    This, I also understand was done because the price of silver was rising too fast and it’s not what Bernanke wants to see. i.e. it would debunk his theory that there’s no inflation.

    So, if the above is true and given what you just said in your piece (i.e. the printing is still going to continue ad finitum)…trying to push down the price of silver by “manipulating” the margin is a short term move that will not work in the long-term. Surely, Bernanke knows this? Does he think people are that stupid and won’t be able to figure out what’s going on?

    • Greg

      NM,
      You have come a long way. You will be OK in all gold and silver investments. Economist Martin Armstrong predicts another upturn in June of this year, so hang in there.
      Greg

  16. Rick

    Excellent article. Thank you Greg.

    • Greg

      Thank you Rick and DroidX-G!
      Greg

  17. droidX-G

    Great article Greg

  18. Agent P

    Greg -

    Indeed, there is No Way this ends well. The only questions are:

    a.) The timing of when our creditors see – in real terms, how they are going to be paid back in worthless $$$.

    b.) The timing of when the American public wakes up to the fact that they will never be paid interest amounting to $quat on their savings.

    Its likely end is in a conflagration of social unrest, Drastically reduced Constitutional Liberties as a result of the unrest, leading up to what amounts to Authoritarian State takeover and rule of the citizenry.

    With information readily available to the public and the rapid learning curve at which people are figuring this all out, it will make for an even worse ending for everyone if government insists on keeping the lie going.

  19. Stan H

    The runaway deficit problem will persist as long as this country does not manufacture its goods, and also reduces its dependence on foreign oil. When the US reaches that point, it can begin to wean its citizens off the cradle to grave welfare lifestyle.

  20. Arius

    You are facing the painful truth. Most people are blinded by being trapped inside the endlessly spinning false dialectic of the Left and the Right.

  21. brian

    My thinking on this whole thing is that we have two possibilities–either those in charge are so stupid that they do not understand the consequences of printing and borrowing so much money, or they are trying to actually bring about such consequences on purpose.

    Given that tiny Tim, our manchild president and all the bafoons and bozos in our legislative branch somehow manage to survive the day from when they get up in the morning and stuff their fat lying maggot like maw w/heart healthy goat cheese and arugula omlets and mirmossa breakfasts without choking to when they wash down a few ice cubes with copious amounts of gin and vodka as they lie stinking in some plush bed with some paid staffer watching themselves on the news to the extent that they can get up the next morning and do it all again tells me they are in fact, however loaded with disgusting flaws, not entirely stupid.

    So we have only one reasonable possibility left………there are a few really bad eggs who actually want to crash this ship, the rest of the crew is being given various inducements and incentives and threats to look the other way–the end result–we are all being treated like complete morons by this government and getting sick and tired of it.

    • myth buster

      I suppose there is a third option: they know this will be a disaster but they don’t see any way out that they don’t think would be worse.

    • kcramone

      This country is being expertly destroyed by very organized factions that make up the administration and exeutive. There are many more than “a few really bad eggs who want to crash this ship…” The left is ubiquitous, unrelenting, and anti-intellectual.

  22. g. johnson

    just a little math for your consideration.

    apprx. 350 million people in the u.s. just to make this simple, let’s say that 200 million of us actually pay taxes. 200 million goes into 2 trillion one million times. leaving each tax payer with a burden share of ..yep. a million bucks.

    guess i’ll hafta get down to the atm so i can pony up my share.

  23. g. johnson

    no, no, wait!! it’s ok, i forgot we can get it from the poor. just take their social security and medicaid.

    whew, for a second there, i thought we had a problem.

  24. joe brown

    ,
    US opens fraud investigations. Mozillo, countrywide, charged
    tried, fined. some us, eu bankers tried on fraud…2011 small time
    though, + Mad. Off….
    “U ..S gov sues De. Bank for mistakes in applying for t a r p $”

  25. Mark Herpel

    Isn’t the writing on the wall plain to see? Nothing will occur to lower anything until it collapses. Stocks, bonds, treasuries…that’s the only way things will change, when it has to happen. Buy gold and silver.

  26. Mitch Bupp

    Hello Greg and all readers, I just wanted to saytht the FED is clearly a self serving bank which only profits from the money which is created by the USA. If they design a policy that creates the need to create an endless supply of money the FED is locked in.

    The question I have is…. if the FED/USA Treasury created XXX dollars and then allowed the “fractionalizing” of those dollars why would you have to create “new money” if the “fractional” economic banking theory was valid?

  27. Joaquin

    Greg,

    Perhaps now is a good time to reverse your repeated advice regarding buying gold?

    1. The U.S. is not the only one who buys gold, aren’t the other financially strapped countries just buying their own bonds instead, knowing they will have a guaranteed –more guaranteed than gold– return. Thus, their exodus from gold.

    2. Assuming interest rates will ultimately spike in the US, aren’t our citizens just selling gold now in anticipation of the interest rate rise so they can get high interest rate returns relative to gold, similar to #1 above?

    3. We will likely see a $4 trillion budget cut. Both the Dem’s and Rep’s agree on the number. The problem seems to be on track in the mind of our creditors. Hence no need for a “safe haven;” no need for gold.

    4. There won’t be a QE3, overtly nor covertly (yes I read your article that says otherwise), so the stock rally and the gold party is over. (Quite frankly, I can understand why the former dropping but exactly why gold had to go down in tandem escapes me… but the fact is that it did and does.)

    5. The debt ceiling will be raised, thus allaying worldwide fears regarding the financial prospects of the US; hence, the “safe-haven” feature of gold dimimishes.

    6. Except for a few fear mongers, the reality is that most stat’s for the U.S. are going in the right direction.

    I’m tweaking you Greg, but I was a big believer in gold and lost over $40K (and counting)in the past few days by holding on. I should have gotten out, given the foregoing. Nonetheless, I am curious about reading your current detailed view re: gold and knowing why and when you and your contacts think gold will bounce back. You may be owing some of your faithful readers a HUGE apology. I hope against hope that it is not the case.

    • Greg

      Joaquin,
      I have never given people market timing advice, even though I have been repeatedly asked for it. I have always said that gold and silver coins are and will continue to be an excellent LONG TERM investment. Might I remind you that silver is still up more than 25% THIS YEAR even with the market correction. Might I also remind you, that you are commenting on a post where the Treasury Secretary is proposing a $2 trillion increase to the debt limit. That said, let me answer you point by point.

      1. Mexico just bought 100 tons of gold according to the Wall Street Journal. That is a pretty poor country isn’t it?
      2. Interest rates rose consistently in the 70′s right along with rising gold prices. The Fed is sticking to 0-.25% interest rates with no let up in sight. When the Fed does raise rates it will be way behind the real inflation rate just like in the 70′s.
      3. Absurd point of view considering nearly every country in the world are adding to gold holdings. China, India and Russia are just a few that come to mind.
      4. I don’t know where you are coming up with the idea that there will be no Quantitative Easing after QE2 has run its course. There will be more money printing. It will be covert instead of overt and I have quoted many qualified sources to back up this premise.
      5. A country that is growing its debt by a trillion bucks a year is a “safe haven?” In who’s world?
      6. Please show me the stats where America is going in the “right direction.” Here are a few that refute your premise. 33 million unemployed people, a record number on food stamps, a record million foreclosures last year with another record expected to be set again in 2011, abandonment of mark to market accounting in 2009 to make the banks look solvent when indeed they are not, 157 banks closed down by the FDIC in 2010 and 40 shut down so far this year. These are just a few stats that prove my point, with many more quoted throughout this site.

      I owe no one an apology for for telling people that gold and silver should be part of every-one’s portfolio, and I have quoted many experts to back up this position. Long term, you will get your money back and then some. You will also be happy you own physical metal. Hang in there my friend.
      Greg

    • Tim

      “I was a big believer in gold and lost over $40K (and counting)in the past few days by holding on.”
      ??? paper or metal? If paper… well you know that’s just taking a bet. you needed to watch things a bit closer… and be able to afford what you bet. Now if you are holding metal…r e l a x, You’ve lost nothing! The up-trend is ALIVE and kicking… it will be just a moment in time before you recover any “losses” and continue on to riches.
      If you hold paper… study.
      If you hold metal… chill.

      “I should have gotten out, given the foregoing.”

      Paper? Yes… but you had a good day at the horses, why complain?
      Metal. No… wait a bit, you’re just getting going.

      “You may be owing some of your faithful readers a HUGE apology. I hope against hope that it is not the case.”

      Stop hoping.
      No-one owes anybody an apology.

      Paper? You (should) know what you invest/bet in… or don’t play.
      Metal? Why say anything? It’s already heading back up, and will continue, with the odd blip, to the end of dollars/money as we know it.

  28. Roderick

    Pay no attention to silver dropping. Its due to the paper silver market. That is a manipulated market. Those who are to survive will not be listening to that crowd.

    Buy now physical silver.

    This may be the last year to be able to own physical silver.

    Paper silver will continue to play until the shorts get crushed. Then the stampede to buy real silver and to own it and hold it in ones hands will commence. At that moment in time you will not find sellers.

    Get in now or forget it!

  29. Davis

    Greg,

    Icovered this in a post titled “So What’s Another Trillion or Two?” on my own blog a couple of days ago.

  30. Jay

    Simply amazing how long the international banksters can continue to prop up a failed system artificially. One that would have died a natural death or recovered on its own if left unmanipulated. How do they do it? They do it the same way as when they make food appear in the middle of a famine. They steal it from the taxpayers and public coffers, put it aside and then give it away selectively during a government generated crises for the purpose of relocating people or impoverishing those they deem undesirable.

    • Greg

      Jay,
      It is amazing but fall it will, all in good time. Thank you for the comment.
      Greg

  31. chiller

    Want to see who’s really behind draining our nation? Everything else is just background noise once you see for yourself. Look at this dollar chart from 1800 to today. It clearly shows how the Fed drained our country through good times and bad, democrat or republican leaders, war and peace, boom and bust. Not even the roaring 20′s or post WWII did the Fed let up on their squeeze of our nation. I’m talking about a group of foreign bankers, not US government or US anything. The Fed is a leach on our finances. Go to:
    http://mykindred.com/cloud/TX/Documents/dollar/
    and see for yourself.

  32. Frankie

    Sarkis, sell your gold to me.

  33. Jan

    What is the end game? That is the question I ask myself. Destroying the American middle class is no win game for the powers that be. If the American middle class is detroyed, who buys the goods the corporations make in their foreign factories, who will borrow from the banks and pay the interest and fees the banks need, who will pay the taxes the nation needs, who will donate to the charities and the world crisis if the American’s money has been siphoned away?

    Who wins by destroying us? So they end up with all our money, what then? Maybe the goal is the One World Government or One World Currency we hear about. Will all the world’s people become wage serfs, barely earning enough to survive? Poor people do not buy goods or invest so companies can grow and make goods.

    Oli is down this week. Why? We Americans have cut back reducing demand. That is power. Imagine what would happen to exporting countries economies. Then their citizens will be unemployed and broke too. Sounds like a losing propostion to me.

    I don’t know what the end game is or when it will all come crashing down. I do know that I will continue to read as much as I can, even if I do not always understand it. I do know that I will not be caught unprepared. I will contine to pick up PM insurance and stock up on food. Beyond that, it is all beyond my control.

  34. slingshot

    Losing money in any investment has got to hurt but if you are not a long term investor you might as well do the stock market and stay away from precious metals. No quick buck here. I jumped in when silver was a little over $4 and chased gold down fron $325 to the bottom. I Passed on the High Tech and Housing Boom as they all said I was a Damn Idiot. I gave silver rounds away for birthdays and gifts and some of the looks were like , Huh?
    As we all experience these corrections, the future holds more of them with even greater divergence. I tell you that to buy metals is a great undertaking as you trade your hard earned paper momeny. That is because all we have is Bullshit currency. No value and if you have gold or silver you still have to trade it back to Bullshit currency to settle transactions. If you do not know the value then how can you make a good transaction for any material? The gold coin in our hand we know has value. What is it worth and how do we convert? That is where we have been glazed over and well removed from honest weights and measures. Just have one of those “Gold Parties”. Call it conveinence. I call it lazy and the bankers knew it was our Achille’s heel. If you can not covert dollars to Yen or Pesos then how will you do gold or silver. Most of us don’t care.
    Reguardless of what they do and say, Congress and the banks know we are in a downward spiral and nobody will be safe.

  35. Nick

    When government says it wants to cut it means they are going to project a number much higher than anticipated, and then they will cut from the high number. So if the actual budget looks to be about $2.5 Trillion, government bafoons will say its going to be $3 Trillion and put the budget at $2.7 Trillion, and tell the hapless American they cut $300 Billion when they actually increased by $200 Billion. Take a good look at what actually took place during the Clinton admin.
    As far as the sell off goes you have to look at what was done in silver this last week and go back to 1980. CME raised margins 4 times in 8 days on Silver. The longs were in good position so it should have forced out the weak shorts and pushed the market higher.
    In 1980 the Comex executive committee went into a closed door session, came out and sold everything in sight, and then announced that the market would be for liquidation only. The market should have gone higher because the longs were sitting on heafty profits, while the shorts were stuck for huge losses.
    There is much more to this story, but the vast majority of Americans wouldn’t believe it can be this corrupt.

  36. nm

    The guy who said he lost 40K in gold (or silver) over the past few days, must not own the physical stuff. If you own the physical, you can just wait it out while your metals are safely stored away.

    Now, if you own the paper and are not checking the charts and price movements everyday and not using stops (to guard against losses) then that’s your problem.

    Had I owned silver ETF”s last week, I would have had to check the price movements everyday and would never have left any open trades overnight. That’s how you get wiped out (by refusing to look at the charts and make decisions based on price volatility). Paper trading is a whole different ball game.

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