Debt Ceiling Crisis in the US
One fact about the United States economy that may surprise some people is just how many times the debt ceiling has been raised. The debt ceiling is how much money the US is allowed to be in debt by - right now the national debt stands around $15.6 trillion, while the debt ceiling is at $16.4 trillion, raised in January of 2012.
Why it's increasing: "Public debt increases or decreases as a result of the annual unified budget deficit or surplus. The federal government budget deficit or surplus is the cash difference between government receipts and spending, ignoring intra-governmental transfers. However, there is certain spending (supplemental appropriations) that add to the debt but are excluded from the deficit. The deficit is presented on a cash rather than an accruals basis, although the accrual basis may provide more information on the longer-term implications of the government's annual operations." Wikipedia.
As I stated in a previous article here on InfoBarrel, the picture of US debt does not get any better looking forward, with President Obama signing a budget that puts us out further in debt. To be fair, Obama doesn't have much of a choice, because if he cuts spending, we would go into a recession.
Since we are spending more than we are taking in, we are going further and further into debt each day, a vicous cycle. Expect there to be another debt ceiling raise in late 2012 or early 2013, as we reach the $16.4 trillion ceiling.
What You Can Do: I strongly believe we are going to see big inflation in the coming years. Actually, I also believe we are ALREADY seeing pretty big inflation. Although the CPI has come in around 2-3 percent, within the Fed's range, the CPI does not include basic everyday costs of living, such as the price of gasoline and health care costs.
I am a big believer in precious metals, as a hedge against inflation and fiscal insanity we are witnessing. As the dollar loses value, gold gains in value. Expect the dollar to lose much more value over the years because of QE, aka "money printing."
I also like real estate as well, although I expect gold to perform better = Gold should be over $5,000 an ounce this decade.
Is QE3 Coming? - Although recent Fed minutes stated otherwise, I STONGLY believe the Federal Reserve will do another round of Quantitative Easing, aka "Money Printing." They already did Operation Twist, which some call "QE 2.0". We also have seen countless bailouts in Europe - where do you think that "money" comes from? It's printed by central banks.
Books to Read: There are a number of books I recommend you read to prepare yourself for the coming financial storm. Peter Schiff has a new book coming out soon called "The Real Crash - America's Coming Bankruptcy and How to Save Yourself and Your Country."
Schiff is an expert on economics and the markets, and he correctly predicting the housing bubble and crisis of 2008.He recently said this in a King World News interview, on the recent Fed minutes:
"In the future, if things deteriorate, they're reading to print...interest rates will rise significantly if they don't do QE - that will crush the housing market and send the economy back into recession. This phony economy that the Fed has created cannot survive without phony money."
"There's going to be a lot more cheap money, so you should be buying gold."
I also recommend Mike Maloney's "Rich Dad's guide to Investing in Gold and Silver," and "The Dollar Crisis" by Richard Duncan. You will learn a lot about the financial crisis and the coming financial storm by reading these books.
Gold Price Target: According to a recent Business Insider article, Morgan Stanley recently predicted a $2,175 Gold price target in 2013.
They are also predicting an average silver price of $35 this year and $42 this year - which I believe are EXTREMELY conservative estimates. Their 2012 average price is $1,845, which I actually agree with (considering we're only around $1,650 now and haven't even touched $1,800 yet in 2012). Over the long term I believe gold could go as high as $10,000 an ounce, and come within a 1:1 ratio of the DOW.
Morgan Stanley is saying QE3 could happen in the first half of this year.
"Investor demand for gold as a hedge is likely to keep gold prices elevated and Morgan Stanley analysts are bullish on gold in 2012."
"While the current strength in the USD is a headwind to USD gold prices, we expect aggressive Fed action, including and the likely adoption of QE3 in 1H12, to be positive for gold, even if the USD continues to strengthen."