Exposing Ideas to the Envelope of Serendipity

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Tuesday, January 25, 2011

USD$ Collapse: Possible Event Coming Our Way?

I find it amazing that the prospect of raising the National Debt Ceiling will be taking place very soon and yet I don't see much focus on this story in the media, but don't forget the smart money has its salesmen and distractors out in full force. We are about to reach again, so quickly, the $14.294 trillion dollar ceiling as we are just shy of  it by $249 billion. Just the day before last, Tuesday January 18th, we added $44 billion in a single day. Six consecutive days of $44 billion additions and we will be over the top, if I'm doing my math correctly.

Yet, on Wednesday Jan 19 at the close of trade the debt subject to the cap surged to $14.001 Trillion according to the daily US Treasury report released Thursday, yesterday. The Treasury is estimating that borrowing will reach that limit sometime between March 31 and May 16 according to secretary Geithner, who advised Congress last month.

Crickets from the media.

Apparently the Treasury is able to postpone the default for a few weeks using certain measures. Also note that the ceiling has never been met before in history. So the question is what could happen if it does. Instead, we are focused on Job numbers, Home Sales numbers and Health Care Repeal.

The Treasury would be prohibited by law to borrow money, should the policy stands as it is, which is likely and the USA would be unable to pay its bondholders or fund programs and benefits in full given that there would not be enough tax revenue to cover all of the country's expenses. To make matters worse, Republicans are vowing a fight on this issue which they could "win" since they control the House. A default would  be catastrophic to the US bond market. so I think raising the ceiling will be an absolute necessity.

Time and time again, the PM sector  gets decimated prior to an overhanging major counter USD$ event. So, I am on watch for news stories that promulgate information that supports further lowering of the dollar.
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