For over a year now, I’ve casually mentioned that the leadership in the West, including the United States and Europe is not just unwilling to take the steps needed to nurse the economy back to health, but that they’re increasingly incapable of understanding what needs to be done.
Case in point: you can’t turn on your TV, open your email or look at a newspaper today without seeing headlines about the impending United States Federal Government shutdown.
But as I’ve noted, the amounts of money being quibbled over are pretty insignificant.
You can do the math for yourself. The total outstanding Federal deficit is now over $14 trillion.
Divide $33 billion or $40 billion by $14 trillion and you get 0.0023 or 0.0028. Multiply those decimals by 100 to get the percentage.
So, $33 billion and $40 billion amounts to 0.23% and 0.28% of the total Federal deficit. Even with these cuts, the deficit will grow because they’re not even close to the amount of spending reduction we need to actually put the Feds back in the black.
These numbers should tell you that the Federal Government has nothing but a token intention to reduce deficit spending.
The time came and went to start paying down these debts. The Federal Reserve already buys more Treasuries (the actual debt) than anyone else. The whole dollar system is a sham now built on Ben Bernanke’s ability to push buttons on a computer.
They’ll be forced to continue to print money to do so UNLESS the Federal Government reduces spending to the point where it runs a surplus OR the Federal Reserve increases interest rates above the point of inflation.
Printing money and keeping artificially low interest rates are both hugely bullish for commodity prices in general, and doing these things is bullish for gold (NYSE:GLD) and silver (NYSE:SLV) specifically.
Most people remember Vice President Dick Cheney’s remarks that “deficits don’t matter.”
He and the Bush administration caught hell for those remarks, and I’m sure he wishes he could take them back.
But what most people don’t know is that there’s a whole, mainstream school of economics that actually believes that deficits don’t matter. Not now, not ever. Deficits, they say, simply cannot bankrupt a country with the power to print its own currency. They’re called neo-Keynesians or Chartalists, or proponents of Modern Monetary Theory.
These people hold enormous sway in the Federal Government, and their theories give tacit approval to the Federal Government to do what it will.
So while our Congressmen and President Obama do a publicity stunt tap-dance on the issue of 0.23% of the Federal deficit, behind closed doors there’s clearly no strong desire to reduce deficit spending, let alone reduce the monstrous deficit.
And it’s this blatant and prideful disregard for the well-trod rules of the market that will continue to boost the price of gold and silver.
Kevin McElroy is a top rated commodity researcher and analyst specialist at Wyatt Investment Research, with a targeted focus on short and long term investment opportunities. He has worked in the investment publishing field for over three years alongside some of the world’s leading commodity traders and analysts. He takes the complex futures and options trading strategies from the floors of the Nymex and the CBOT, uniquely combines them with economic trends and positions his recommendations in a way that any investor, from a straight long-term buy and hold investor to a sophisticated day trader can easily understand, implement, and profit.
Kevin constantly finds unique ways to profit from the “real stuff” like oil, gold, iron, corn – the energy, money, goods and food that the world constantly needs more of. Kevin is the daily editor to Resource Prospector and a contributor to Energy World Profits and Global Commodity Investing.