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Debt-Terrorism and Gold Records: Just Another Day

August 4, 2011 by · Leave a Comment 

COMMENTARYProspectingJournal–Whether an illusion or not, a bubble or a parabolic paradigm shift, gold puts a smile on my face every time I hear it in the news or read about it among the vast sea of opinions. Forget the so-called economists and anti-gold philosophers: when gold goes up it does so in contrast to fear, which (lately) tends to be the result of financial madness and political turmoil. Evidently, I see no lack of fear and idiocy in our immediate future and thus am quite confident that gold and other PMs will continue to make headlines, while debt continues to terrorize–there, my prediction.

At a certain point in their lives, I think many gold bugs must likely say “screw it” and start cheering for the financial maelstrom. Sure, this doomsday scenario could, if it came to pass, unleash an incomprehensible wave of misery on the world, but why not just accept the coming crisis in stride? Some laugh at the collapse believers now, but the ultimate joke is that each passing day makes them seem more sane. So if nobody is doing anything to prevent the upcoming SHTF moment, why not at least cheer for the one thing that’s consistently having a “good day?”

Let’s start with the debt ceiling. When the democrats caved (as much as humanly possible), they presented the American people with what they called the people’s wish, a lame and pathetic way to dump responsibility onto those who are in desperate need of relief. Instead of increased taxes on the richest citizens and appropriate cuts and hikes in other agreed-upon targets, US citizens get nothing but more debt. However, it gets even better: the deferred debt on Treasury’s balance, from all the debt-ceilng indecision time, has now caught up with the government and as a result America’s Debt to GDP ratio just hit the post World War 2 high of 97.2 %. 

Congratulations! Er, wait a second . . . The Daily Treasury Statement last night showed that total US marketable debt shot up to$124.6 billion and intergovernmental holdings soared by $113.6 billion–a combined one-day change of $238.2 billion. This is the single biggest one-day increase of US debt in history, though I am sure they can do better. To add to the confusion, the new ceiling is actually not the $900 billion increase as requested, but actually just $400 billion more than the $14.294 billion previous ceiling that the US just blew through. This is causing quite a stir on the web at the moment, as various authors are scratching their heads and wondering just why the US government would go through the trouble to raise a ceiling if it’s just going to be breached again in a couple months. Poor Obama.

Next up is fear. Last week, the VIX, known as the “Fear Index,” shot up to 26.2, which was the highest fear level since March when the tsunami and nuclear disaster occurred in Japan. The VIX is up 35 percent over the past eight trading days and, with many so-called experts saying that an increase to 30+ is the beginning of mass panic, I’m thinking we’ll need to raise the fear ceiling as well. With measures such as this, Americans can now accept that even their emotions are just regarded as numbers in the digi-sphere, let alone their soon-to-be worthless life savings.

After rolling with laughter at the Onion’s latest Bernanke mockery, I had a short internal debate and pondered buying a gold coin. And with lineups going far outside the local bullion exchange, I saw fear and logical investing working their magic here in Canada. QE3 has already made its way into the news-speak, it’s now apparent to everyone that the debt ceiling is a sieve, and there are even internet groups that take bets on what currency will fold first (put me down for USD). So yes, I’ll keep on cheering for gold; it seems to be the only forward-moving leadership we have.

Chris Devauld

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