Raising the Debt Ceiling

The United States government seems to enjoy spending our money with the zeal of a rap star.

They like it so much, in fact, that they’re going to need a little more from you…

Last week, Treasury Secretary Timothy Geithner warned Congress that this year’s statutory limit on federal debt will be reached as early as spring — between March 31st and May 16th.

Geithner alerted congressional leaders saying:

Even a very short-term or limited default would have catastrophic economic consequences that would last for decades. For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent.

I don’t buy it.

We’ve already been down this road before…

Bush’s TARP and Obama’s Economic Stimulus effectively did the same thing.

And look what happened: more than 90% of the money went right to the banks, where it still resides.

Bush and Obama did their jobs. They protected the banks at all costs. And that was, of course, the design from the start.

To bring confidence back into the U.S. system, we’re simply going to have to cut out the reckless spending.

This would point America in the right direction and reduce the risk of a default or devaluation that looms in our near future.

Unfortunately, this does not appear to be the road our politicians want to take.

The trouble with this train wreck of a debt picture is that rates are going to have to go higher in the near future. That’s because the folks who have been buying our debt over the course of the last 30 years are no longer interested in our new debt offerings at current interest rates.

Not only are they not interested in buying our new debt; but they’ve decided to dump the Treasury paper they already have.

This puts the U.S. in a tricky situation. To make our obsessive borrowing more attractive, we’ll have to continue to raise rates. This is where things really start to go south…

And the whole of society could fail because of unsustainable spending and debt scenarios at every level of government worldwide.

This was typical of every other empire our world has ever known before their ultimate collapse: the Spanish, Greek, Roman, and British Empires all came to an end because they spent themselves into oblivion — just as the European Union, England, Japan, and the U.S. are doing today.

Just consider how truly desperate some situations have become…

Last week, the state of Illinois increased personal income tax by 66% and corporate income tax by 45%. These increases are designed to address a $15 billion state budget deficit that lawmakers said was leading the state into insolvency.

How long is it before we start seeing headlines that include “State Bankruptcy”?

On its current path, the United States could not possibly meet all of its future obligations. And the end game could mean collapse.

That means as an investor, you need to get your ducks in a row.

The place to be is in gold, silver, and the precious metals mining stocks. They are only going to go higher as the politicos continue to spend our money with the reckless abandon of a daredevil.

Good Investing,

Greg McCoach
Analyst, Wealth Daily
Investment Director, Mining Speculator and Insider Alert