As I listen to the current political wranglings over raising the debt ceiling - or NOT! - it hit me like a fast ball off the batters helmet. Both sides are right! If we raise the debt ceiling we head down a path of hyperinflation and dollar destruction. If we don't raise the debt ceiling we head down the path of default and dollar destruction.
Today, Treasury Secretary Geithner warned Republicans against a brush with default. In essence, if we continue threatening to vote against raising the debt ceiling, the very act of using default as a political weapon, causes our creditors to squirm. Really, how willing should any other country be right now to lend us money? Why would anyone buy a Treasury from us tomorrow?
My question now is, what were you thinking when you passed the 2011 budget months ago? Apparently, both sides agreed then, to a $1.6 trillion deficit. Now, we have this incredible drama to play out as though it just occurred to them that we are headed down the same path no matter what. The scramble is on to see who will get the blame and believe me there will be plenty of blame to go around.
I think the markets are catching on, too. Today, the dollar index drifted lower while precious metals shoved their way toward new highs. Gold prices hit new highs and silver surged passed $42 an ounce. No matter the outcome of the current budget battles, it's going to be tough to feel like the right thing was done. I just don't see a consensus arising that the perfect plan was hammered out.
Seriously! Consider what each side is saying, weigh the consequences and take your pick. Then try to talk yourself out of gold or silver as a means to protect your savings and retirement. Every day it becomes more clear why global silver and gold demand just keep climbing.
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