I engaged in some commentary with US Republicans recently, who were adamant that the way out of their dilemma was draconian cuts in spending. They believed that if vested pensions couldn’t be honored, they shouldn’t be. They believed that if the State Government couldn’t meet its obligations, it shouldn’t. It should just pay for current outlays.
Would that it were that easy.
The Question – How does the US pay a Debt that is Increasing Annually at Absolute Amounts approaching the Total Revenue Sources of the Government?
It is seemingly impossible. I discussed previously how Canada solved its similar dilemma in the 1980’s by just holding the line and cutting current spending to the levels of current revenue. In due course, the growth in the economy made the impossible deficit seem reasonable, and then this managed debt became a subject of world admiration (in spite of the financial world’s current nonsensical admiration of debt that remains today similar in size to what it was 20 years ago).
There was a time when doublespeak didn’t confuse simple topics. If you ignore the doublespeak, you might realize that if you owe something, whatever it is called, you still owe something. However, that is the subject of another blog.
No-one seems to believe that the US can accomplish this so easily.
It is hard to ignore the belief of others in the financial community. Reality is often the belief of the crowd. If everyone acts as if that belief is the reality, that belief becomes the reality.
Consider that credit rating agencies are now starting to actually issue debt warnings about the credit rating of the USA. Unheard of previously.
Consider that there is a growing belief in the US that debts and obligations simply be ignored. “Damn the torpedoes – Full speed ahead.” The thought is scary.
Consider that China and India every month import more oil than they did the month before. It is becoming less relevant to the demand on the supply of oil that the US imports more or less oil.
Consider that there are now more cars being manufactured in China by GM than in the US. The demand for oil will not abate. it will continue to grow.
Consider that the price of oil continues to rise. Upwards pressure is mounting. This is a function of the falling US dollar, and the increasing worldwide demand for oil.
Consider that the price of silver is increasing at unprecedented speeds.
Consider that the US is mired in the politics of the lobbying oil industry powerhouses, and refuses to consider a real energy policy. The nation remains divided on NIMBY as to new drilling for oil or gas. It is so odd, that the oil industry is able to blind the nation to the reality of what is actually occurring.
Have you read the story of “The Emperor With No Clothes?” He believed he had the finest suit and was convinced that although he in reality had no clothes, he believed he was clothed.
So it is in the US.
Every single day of the year, for every single year, the US sends enormous sums of US dollars overseas to pay for the ever increasing cost of imported oil. Yet the Emperor continues to believe that he is wearing clothes.
The answer to this idiocy is of course to pass laws in the US that require cars to use natural gas rather than oil. Every other country in the world would do this in the face of the dropping US dollar, and the insatiable demand for oil. But not in the US. The oil industry lobby is too powerful.
I am beginning to have doubts as to whether democracy actually works. Aren’t you?
Where to Invest
In the face of these realities, either the US inflates its way out of this mess, or it wakes up and changes the laws, or it defaults.
There are no other options.
Do you buy US securities on the NYSE, or NASDAQ? Consider that even if these stocks increase in value, the falling US dollar makes their value reduce.
Given this situation, you must have a hedge against the falling US dollar, the threat of inflation, the threat of default, and all of the other current threats. You have to buy something that has the best chance of holding its value in the eventuality of these occurrences, or so many more that the world is facing currently.
The answer of course, is buy OIL, or SILVER, or GOLD, or something that is measured everywhere in every currency and holds its value in spite of changes in currency values.
How to buy these commodities? ETF’s, or Mutual Funds, or actual physical possession are alternatives.
We remain steadfast in the belief that undervalued juniors with great promise, that are in the field of oil, or gold, or silver, or base metals, are the place to be.
