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Debt ceiling crisis

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Debt Ceiling Bill Nothing More Than a Band-Aid

By , Contributing Writer, Money Morning -

We have a short-term debt ceiling fix - with emphasis on short term.

U.S. President Barack Obama Monday night signed into law a bill suspending the debt ceiling, a move that allows the government to avoid default-at least until August when Congress will again have to act to prevent such a scenario.

The new law lifts the current debt limit through May 18, allowing the federal government to continuing borrowing to pay its bills until then.

But Congress does have more leeway than the May 18 deadline. The Treasury can use "extraordinary measures" to access funds, which will give it until August before the risk of default comes up again.

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Are Steep U.S. Spending Cuts Inevitable?

By , Contributing Writer, Money Morning -

U.S. Rep. Paul Ryan (R-WI), the chairman of the House Budget Committee, is adamant Republicans will resist any further tax increases - a staunch GOP stance that makes steep spending cuts almost certain.

Ryan, the 2012 vice president nominee, told NBC's "Meet the Press" Sunday that the $1.2 trillion worth of automatic spending cuts will take effect because "Democrats have opposed our efforts to replace those cuts with others."

In the NBC interview, Ryan took aim at President Barack Obama.

"I don't think that the president actually thinks we have a fiscal crisis," Ryan said. "He's been reportedly saying to our leaders that we don't have a spending problem, we have a healthcare problem. That leads me to conclude that he just thinks we ought to have more government-run healthcare and rationing."

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Will the Debt Ceiling be Good for Gold and Silver?

By , Contributing Writer, Money Morning -

Investors preparing for Washington's budget battle need to know: Will the debt ceiling be good for gold and silver?

Thanks to recent legislation passed in the U.S. House of Representatives Wednesday, the debt ceiling could be extended until May 19. The bill now moves onto the Senate where it is expected to get the green light, then should be signed quickly by U.S. President Barack Obama.

That gives investors time to prepare for what any budget decision - or indecision - out of Washington will do for their investments.

While the bill leaves the government without a long-term budget strategy, investors ought to have a plan in place.

One thing they can plan on is higher silver and gold, and here's why.

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Debt Ceiling Bill Includes Controversial "No Pay" Plan

By , Contributing Writer, Money Morning -

Republicans will vote tomorrow (Wednesday) on a debt ceiling bill that will give Congress nearly four months to make some major budget decisions - or risk losing out on pay.

The bill aims "to ensure complete and timely payment of the obligations of the United States Government until May 19, 2013," according to a release Monday from the House Rules Committee. Exactly how much the $16.4 trillion debt ceiling will be lifted hasn't been discussed.

In a significant shift in GOP strategy, the legislation does not include specific spending cuts, like previously when Republicans have requested dollar-for-dollar cuts to match the debt ceiling increase.

What it could include is a requirement for both the House and Senate to pass a budget by as early as April 15 or have Congress members' salaries held in escrow until one is passed - what the GOP has coined a "no budget, no pay" rule.

"[I]f the Senate of House fails to pass a budget in that time, members of Congress will not be paid by the American people for failing to do their job. No budget, no pay," House Majority Leader Eric Cantor, R-VA, said last week.

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Investors: Looking at a Post Debt Ceiling Crisis World

By , Money Morning -

Global Economic Intersection article of the week

With the debt ceiling extended, the risk of a catastrophic automatic pro cyclical Treasury response, as previously discussed, has been removed.

What's left is the muddling through with modest topline growth scenario we've had all year.

With a budget deficit humming along at 9% of GDP, much like a year ago when markets began to discount a double dip recession, I see little chance of a serious collapse in aggregate demand from current levels.

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Brace for the Worst as Debt Ceiling Crisis Deadline Nears

By , Associate Editor, Money Morning • @DavidGZeiler -

If Washington lawmakers don't beat the debt ceiling crisis deadline, we'll see plummeting stocks, soaring interest rates, a slumping dollar and a severe shock to the weak economy.

All of which will hit you in the wallet - and hard.

Most investors are not prepared for the consequences of the failure of U.S. lawmakers to agree on a plan that will raise the federal debt ceiling before the Aug. 2 deadline.

Few believed it even possible, but with only a week to go Congressional leaders and U.S. President Barack Obama are no closer to a deal than they were several months ago.

"We may have a few stressful days coming up - stressful for the markets of the world and the American people," William M. Daley, President Obama's chief of staff, admitted on the CBS program Face the Nation on Sunday.

Until recently, the markets have kept a cool head - most analysts have assumed government officials would reach a compromise in time.

But when negotiations between President Obama and Speaker of the House John Boehner, R-OH, broke down over the weekend, the possibility of a U.S. default suddenly grew frighteningly real.

"There has been this expectation that at some point, they'd come up with a deal, but given the failure this weekend, I think market confidence is eroding," John Canavan, a market analyst at Stone & McCarthy Research, told The New York Times.



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America for Sale: Liquidate Assets to Avert Debt Ceiling Crisis, Republicans Say

By , Associate Editor, Money Morning • @DavidGZeiler -

It would be the greatest garage sale in history.

The United States Treasury possesses 261.5 million ounces of gold, worth about $392.25 billion at current prices.

Some in Washington say the time has come to sell some of its gold, along with other government assets such as land and buildings, to pay down the $14.3 trillion federal debt and give Congress more time to resolve the federal debt ceiling crisis.

"It's just sort of sitting there," Ron Utt, a senior fellow at the Heritage Foundation, a conservative think tank, told the Washington Post. "Given the high price it is now, and the tremendous debt problem we now have, by all means, sell at the peak."

U.S. Rep. Ron Paul, R-TX, agreed, telling the New York Sun that selling some of the Treasury's gold would be "a good and moral decision. An individual would have to do the same."

The idea isn't as crazy as it might sound. Six nations - Australia, Austria, Belgium, the Netherlands, Portugal and Sweden - collectively sold off 48% of their gold reserves in the late 1990s. Britain sold half of its gold reserves from 1999 to 2002, and the International Monetary Fund (IMF) sold 13% of its gold - over 403 tons of the yellow metal - as recently as 2009.

The ongoing Congressional struggle over raising the debt ceiling took an ominous turn last week when Republicans walked away from the negotiations, citing Democratic demands for tax increases. At the same time, Republican demands for deep spending cuts have met with resistance from Democrats.

With the deadline just five weeks away - Congress must act before Aug. 2 to avoid defaulting on the nation's debt - some are looking at the sale of gold and other federal assets as a way to reduce the debt and give both sides more time to reach a deal.

Beyond Gold

The Treasury's gold is just one asset some Republicans think could be liquidated.

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