Toilet Paper?? This Is How The Dollar Could One Day Be As Valuable

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This week, we went up against the arcane debt ceiling once again. However, in a stunning display of maturity (?), our representatives in Washington have bypassed the usual opportunity for political brinksmanship and passed a clean debt limit increase bill. This means they are not, as usual, attaching other unrelated political footballs to the bill so they can play chicken with each other and with our country’s borrowing ability. Strange. Just months ago, that led to the infamous government shutdown (if you can really call what they did a “shutdown”), which mostly backfired for the politicians who backed it. Apparently, they aren’t going down that road again. Might they actually be learning something in Washington?

What our politicians should learn is that the debt ceiling is pointless if it keeps getting raised every few months. The law was originally intended to put a strict limit on Washington’s profligate spending and force politicians to prioritize and live at least somewhat within the reach of the nation’s means. It was only supposed to be raised in case of emergency – you know, like war.

Conveniently enough for Washington, we always seem to be in a state of emergency. And we are perpetually at war, so that excuse is always available.

Of course, our fiscal picture has always been alarming and is getting worse; but the non-partisan Congressional Budget Office has issued yet another warning that our government’s spending habits are putting our future at severe risk. According to CBO Director Douglas Elmendorf:

“The large budget deficits recorded in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards. CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024 (the end of the current 10-year projection period). Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt).”[Emphasis added]

The CBO is not hell-bent on espousing conspiracies. Nor are they trying to sell you anything. They are simply looking at numbers and projections and stating as gently and matter-of-factly as they can that the country’s spending and debt load is unsustainable, that what we could be facing here is a Greece-style debt crisis. The course we are on threatens to overwhelm our ability to eventually pay our debt back, which will hurt our credit rating, which will raise interest rates, and which will create inflation.

A $4 trillion balance sheet at the Federal Reserve means that we have massive amounts of inflation pent up and waiting.

No country can accelerate down the course we’re on and survive unscathed in the long run. Greece is just one example of what can happen. Argentina is another; they seem to be in perpetual currency crisis mode. But no country is immune from the laws of economics. Not even us.

If you inflate your currency to oblivion, if you can’t control your spending, and if you regulate and tax your businesses out of business, you will eventually kill your economy. It’s simple mathematics.

We suppose it is possible that Washington will wake up one day and change course. It could happen. Politicians could have a “come to Jesus” moment and decide that in too many areas – in social programs or in foreign policy, for example – spending has gotten too wasteful, and that our fiscal house demands to be put in order. We suppose that could theoretically happen. We could restructure how government operates, elect all new people, and get on the right course. If you’re optimistic, maybe you are betting that way and hoping it happens before they run us into the ground.

If you’re a realist, however, you see the patterns in Washington and the incentive structure, so you’re likely betting otherwise and listening to what the CBO is saying… even if it falls on deaf ears in Congress.

The realists realize you need a solid footing in your portfolio – a real, tangible asset, like gold – to get by when the fiscal crisis hits. The dollar will be toilet paper at that point. Is that what you worked your whole life to end up with? Toilet paper? Please be smarter than that. Let’s get started today. It begins with a simple click here.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Government Shutdowns, Debt Ceilings, And Obamacare: What Political Football Season In Washington Means To You

government shutdown Government Shutdowns, Debt Ceilings, and Obamacare: What Political Football Season In Washington Means To You

So you can’t visit a national park right now without hopping a barricade. Some 800,000 “non-essential” federal employees will be off the job for the time being, and over 1 million federal workers might have delayed paychecks. There will be delays at the Veterans Administration, which is otherwise so prompt to serve those who served our country…

And yet, the EPA is almost entirely down for the count. The IRS will cease audit and collections functions for the duration of the partial government shutdown. In other words, this is a net win for the American people!

But we’re saving money, at least, yes? Not so much. In past government shutdowns, all missed paychecks were made up; meanwhile, the same bills continue to pile up. Nothing has been done to address our fiscal problems or reduce outlays; there will just be some delays in paying some of them. These delays cost money while creating pain and drama.

It will be interesting to see who in Washington blinks first and how long it will take. The mechanics will foreshadow the bigger ticking time bomb headed our way in 2 weeks – the debt ceiling.

Though the government shutdown has gotten everyone’s attention, social security checks are still being cut. Medicare payments are being made. The Federal Reserve is (of course) still printing money like mad, and none of their employees are affected.

Not so if we reach the debt ceiling without an increase.

If we reach the debt ceiling, the nation’s statutory borrowing ability is exhausted; and we would have to *shudder* live within our means. The government would be dependent on cash on hand and tax receipts. This is about $5 billion a day. A pittance, right? Yes, when you spend $11 billion that same day. Without our borrowing ability, choices would have to be made about what outstanding bills to pay and which ones… not to. Everything would theoretically be on the chopping block. Social security payments, interest payments, everything.

Think about this for one second. Our government outlays and promises so far exceed its ability to pay that it must borrow voraciously, constantly, profligately, and maximally. How long will this be sustainable, even if we make it through another debt ceiling battle this time? How responsible is this sort of accounting?

Understandably, credit ratings agencies are watching closely and talking worst case scenarios. They are quick to qualify, however, that they don’t think it will come to that. We have our doubts as well.

This time.

But what about next time? When they presumably pass the new debt limit, what will it be? How long until we are right back in this position again? A year? 18 months? 3 months? We can’t be sure. But we will get there. Then the uncertainty begins all over again, and we all know how the market feels about uncertainty.

Washington seems to thrive on it. If they did not, they would simply admit that the debt limit itself was not accomplishing its stated goal anymore, which is to limit the amount of debt the government is allowed to rack up. It is a self-imposed limit. They could unimpose it. No one is seriously mired in the delusion that Washington intends to curb spending voluntarily at any point – ever. Stop playing games, and eliminate the debt ceiling. It’s a sham, and everyone knows it. However, it is not an idea Washington is taking seriously at this time.

Like government shutdowns, the debt ceiling is a political football both sides seem to enjoy running up and down the field.

The question is – how can you best insulate your portfolio from the insanity in Washington? We have some ideas…


This commentary originally appeared at and is re-published here with permission.