This Is Why A Gold Standard Is Required

(Treasury Secretary) Lew to Congress: US hits debt limit on March 16, needs to be raised ASAP (LINK)

Obama has made the claim that the U.S. Government spending deficit “narrowed” from about $1 trillion to $483 billion in the Government’s 2014 Fiscal Year (Oct – Sept).   But this is not possible.  Why?   Because the amount of Treasury debt outstanding increased from $16.74 trillion to $17.82 trillion during the Government’s 2014 fiscal year (LINK).   Once again, Obama has lied blatantly to the public.    Based on the amount the Treasury debt load increased, the true spending deficit in FY 2014 remained at around $1.1 trillion.

The debt ceiling has been raised 13 time since 2000.  It’s been raised 6 times since Obama took office and suspended twice.  “Suspended” meaning that the debt ceiling was removed temporarily.  In February 2014, Congress voted to waive the debt ceiling limit, which had been set at $17.2 trillion.  The current amount of debt outstanding is $18.14 trillion (LINK).  This “auto reset” expires on March 15, 2015.   Once again the public is going to have endure the absurdity of the Kabuki Theatrics conducted by Congress as they “debate” the issue of raising the ceiling.   We can be guaranteed it will happen at the very least to ensure Congressional paychecks and perks continue flow uninterrupted.

The U.S. Government prints and issues Treasury certificates just like the Fed prints dollars. When QE began, the Fed started with buying the garbage mortgage paper from the big banks.   In November 2010 it began to print money used to finance new Treasury issuance. Between that time and October 15, 2013 – when QE formally “ended” – The Fed was the biggest source of funding for new Treasury issuance.  It bought over two-thirds of all new Treasury debt.   Since then, Japan and the EU countries – U.S. lapdog countries – have been the primary suppliers of green heroin to the U.S. Government.

And now the Obama Administration, led by Jacob “Jack” Lew, are back to feeding at the hog trough by asking for even more debt.  This is debt that will never be paid back.  Debt issuance like this is also unsustainable.   Either the Fed/Treasury dynamic duo will eventually be forced to engage in hyperbolic money printing or let the Government financially collapse.  I don’t see the latter happening, which is why the former seems inevitable.

Perhaps this is why Alan Greenspan, in a continuance of his endeavor to salvage his legacy as “The Maestro,”  has admitted that the U.S. is on the verge of “explosive inflation”  (LINK).

All of the above would not be possible in a world in which the money supply is anchored by a gold standard.  Humans, especially politicians –  Fed members are ambiguously yet unequivocally politicians – can not be trusted to manage the money supply on their own.  Gold provides the requisite guard rails.

 

10 thoughts on “This Is Why A Gold Standard Is Required

  1. Fed buys debt = debt monetization. Bond vigilantes soon step in. Rates rise (significantly). Game over. Zero bound enables addict to continue, until it doesn’t. Debt monetization is end game and it does not end well. Japan blows up first, then US.

  2. So we need gold to help solve the issue. I know that. Try asset monetization. All the people in the marketplace have to do is put their own gold into circulation and the liquidity system will right itself based on the bullion supplementation (debt-free) combined with debt removal/retirement as fiat gets freed up

  3. Doesn’t matter who blows up first. The repercussions will be instantly and you won’t be able to tell who was first.

  4. It boggles the mind how the entire system is being gamed.
    Just read an article that Allied Nevada has gone BK. The low
    value of the paper price with some poor management has forced
    the miner to shutdown, article attached. It would seem that the system
    has this control mechanism down to a science. I put my tin foil hat on
    and wonder if the banksters lower the price of gold and silver, force the
    miners to go out of business. The banksters then come in pick up the
    assets very cheap and then control the gold.

    http://www.zerohedge.com/news/2015-03-10/allied-nevada-gold-files-bankruptcy-protection

  5. While you are right, technically – this is my understanding of the matter – the deficit DOES NOT include new debt, so the deficit (which is meaningless without a look at the debt) DID decrease, meaningless as it is. That’s the kind of “truths” we got from our fellow world leaders these days. A good close 5 to 10 minute look at the US debt clock is all one needs to invest to see that it’s all a bunch of BS. Appalling.

  6. Same stuff during clinton adm. They claimed a budget surplus but debt increased every year. Whats more important is gaap based financial for fye 14 , unfunded liabilities increaed 3 trillion. Next. Are we paying vendors slower to preserve cas? Are we borroeing from fed retirement fund.

    Many way to cook books.

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