Emptying the Coffers

[gajoinvest24 10]

We will be back the markets and have a short talk about: "Emptying The Coffers?" Just listen to the experts and share your thinking so that we can learn together!

 

Emptying the Coffers?

 

Presidential hopeful Ron Paul recently made headlines by suggesting that the US sell gold holdings to try to curb debt issues. The government has been butting its head against the debt ceiling, which will likely be raised shortly, so why would selling be a good idea in Paul’s eyes? More importantly, what would compel a nation to sell bullion assets and would it be a good idea?

 

Past performance is not indicative of future results.

***Chart courtesy of Gecko Software

 

First let’s dispense with the reasons behind the suggestion. The US is fumbling beneath the weight of substantial federal debt. So heavy is the burden that the country was recently threatened by a downgraded outlook on credit-worthiness. This was no joke, as the idea of one of the globe’s biggest financial machines being downgraded was enough to send most investors running for cover. The debt ceiling of $14.294 trillion has been reached, and as of the middle of May, US Treasury Secretary Timothy Geithner is in a position where he has twice asked for the lid to be lifted. The trouble now is that Congress may have to look at some extraordinary measures to get funds, including federal employee payroll trimming. When the debt reaches its ceiling, the tarnish on our reputation is pretty visible. That is why the outlook for the nation was lowered. Foreign holders of our debt won’t want to take the risk that the US will falter, and the strength of the US dollar comes into question.

 

In an attempt to resurrect our global reputation, Ron Paul is basically suggesting that the government sell gold holdings to take care of a chunk of that debt. There are other things that the Treasury could sell, including land, but from the congressman’s perspective, the gold in Fort Knox is “just sitting there.” Gold prices are at high levels compared to other dates in recent history which furthers the argument that selling at all would mean selling now when prices are high. Most banks and governments have some form of bullion holdings and the US has oodles. According to IMF data, we hold about 8,000 or so metric tons at least (as of the late 1990s.) Conspiracy theories aside, that is. So why not sell some when prices are over $1,500 a troy ounce?

 

The answer is a little delicate – how do you know when it is the right time, if at all, for a bank to sell? Famously, some leaders made potential blunders when they decided to sell gold holdings. Australia’s bank famously sold the majority of its holdings in the late 1990s because the bank’s board didn’t believe that prices were going anywhere. They also argued that......

Edited June 3, 2011 by MadMarketScientist
removed url

[Tams 20]

Lawmakers warned US may lose top debt rating

Moody's says Congress, Obama need to act to head off possible default

 

A second major credit rating agency is warning the U.S. government that it could lose its sterling debt rating if Congress and the Obama administration don't reach an agreement to raise the nation's borrowing limit.

 

Moody's Investors Service said Thursday that if the parties fail to make progress soon, it would put the U.S. rating under review for a possible downgrade. That's because there's a "very small but rising risk" that the government will default on its debts.

 

Standard & Poor's, another major credit rating agency, issued a similar warning in April.

The U.S. government hit its $14.3 trillion borrowing limit on May 16. The debt limit is the amount the government can borrow to help finance its operations.

 

full story here:

Leaders warned US may lose top debt rating - Business - Stocks & economy - msnbc.com

[MightyMouse 12]

We will be back the markets and have a short talk about: "Emptying The Coffers?" Just listen to the experts and share your thinking so that we can learn together!

 

Emptying the Coffers?

 

Presidential hopeful Ron Paul recently made headlines by suggesting that the US sell gold holdings to try to curb debt issues. The government has been butting its head against the debt ceiling, which will likely be raised shortly, so why would selling be a good idea in Paul’s eyes? More importantly, what would compel a nation to sell bullion assets and would it be a good idea?

 

Past performance is not indicative of future results.

***Chart courtesy of Gecko Software

 

First let’s dispense with the reasons behind the suggestion. The US is fumbling beneath the weight of substantial federal debt. So heavy is the burden that the country was recently threatened by a downgraded outlook on credit-worthiness. This was no joke, as the idea of one of the globe’s biggest financial machines being downgraded was enough to send most investors running for cover. The debt ceiling of $14.294 trillion has been reached, and as of the middle of May, US Treasury Secretary Timothy Geithner is in a position where he has twice asked for the lid to be lifted. The trouble now is that Congress may have to look at some extraordinary measures to get funds, including federal employee payroll trimming. When the debt reaches its ceiling, the tarnish on our reputation is pretty visible. That is why the outlook for the nation was lowered. Foreign holders of our debt won’t want to take the risk that the US will falter, and the strength of the US dollar comes into question.

 

In an attempt to resurrect our global reputation, Ron Paul is basically suggesting that the government sell gold holdings to take care of a chunk of that debt. There are other things that the Treasury could sell, including land, but from the congressman’s perspective, the gold in Fort Knox is “just sitting there.” Gold prices are at high levels compared to other dates in recent history which furthers the argument that selling at all would mean selling now when prices are high. Most banks and governments have some form of bullion holdings and the US has oodles. According to IMF data, we hold about 8,000 or so metric tons at least (as of the late 1990s.) Conspiracy theories aside, that is. So why not sell some when prices are over $1,500 a troy ounce?

 

The answer is a little delicate – how do you know when it is the right time, if at all, for a bank to sell? Famously, some leaders made potential blunders when they decided to sell gold holdings. Australia’s bank famously sold the majority of its holdings in the late 1990s because the bank’s board didn’t believe that prices were going anywhere. They also argued that......

 

US policy is to promote US interests and provide them with an unfair advantage in domestic and global commerce. THE US policy on natural resources is to hoard them by owning them, controlling territories that possess them, or be allied with countries who are rich in them. Recent history have shown and future events will show how bad an idea it is to take sides against the USA on most matters especially if you are in possession of vast amounts of natural resources.

 

Ron Paul's ideas are theoretically good and logical, but would never pass muster in congress since his ideas have the effect of removing control and leveling the playing field for business interests. The US would be more likely to figure out a way to hoard more gold at these high prices than they would be to sell it. Our goal is to drink everyone else's milkshake first and leave ours for last.

 

These are, of course, only my interpretation of US policy and in no way am I condoning their actions.

 

A downgrade of some sort will happen and so will some sort of restructuring or default. It won't be called a restructuring or default but the net effect will be the same.The issue is not so much how much we spend or have spent, as it is the amount we have promised to spend. We have something like 78,000 people turning 65 everyday. We currently have about 25 million people over age 65 and collecting SS (social security) and receiving medicare benefits and in 2020 we will have 100 million people over the age of 65 and receiving SS and Medicare with only 120 million people working and contributing to SS.

 

The likely fix to it all will be some sort of new medicare trust will be set up that we will employees and business owners and wealthy retired tax payers will have to contribute to to fund future medicare obligations. Just a guess.

[zdo 20]

Too pessimistic ??

 

The Sky Is Falling, It Is Time To Panic And The U.S. Economy Has Fallen And It Can’t Get Up