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Gold and Energy Advisor's Real Wealth

Real Wealth #226  03/23/2009

Trillions and Trillions of Debt Being Piled On - They've lost their minds in Washington


Dear Subscribers,

Another Monday and another Trillion dollar government program has been announced by the Obama Administration.

In making today’s announcement the Treasury Department justified its latest its plan to address toxic assets weighing on banks' balance sheets by asserting the U.S. financial system "is still working against economic recovery."

The Treasury is insisting that one major reason the financial system is still in crisis is because of "legacy assets" and securities that are compromising banks' ability to raise capital and their willingness to boost lending. In short, there are still countless real estate loans that are not performing i.e. “Toxic Assets”.

Under this newest program -- the Public-Private Investment Program -- the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. plan to work with private investors to try to restart a market for these troubled assets.

The federal government will use as much as $100 billion in funds from the Troubled Asset Relief Program and capital from private investors in order to generate $500 billion in purchasing power to buy legacy assets, Treasury said in documents Monday. The department noted that the program could potentially expand to $1 trillion over time.

The stock market is seeing this as a positive move and has rallied at one point today to over 300 points. I think this is pretty amazing when you consider that we learned late Friday from the Congressional Budget Office that President Barack Obama's budget proposals, if carried out, would produce a staggering $9.3 trillion in total deficits over the next decade, much more than the White House has predicted. Keep in mind this doesn’t include the off budget spending. But you don’t need to add those trillions to the official numbers to realize how incredibly dangerous the current economic course being charted in Washington really is.


Some are predicting a $20 Trillion Federal Debt in a few years others are predicting $25 to $30 Trillion

The Entire Federal Debt at the end of the Clinton Administration in 2000 was $5.674 Trillion Dollars. We’re now looking at a Federal Debt at the end of 2008 of $11 Trillion and rapidly climbing. In an appearance on "Fox News Sunday," Sen. Richard Shelby of Alabama who is the top Republican on the Senate Budget Committee said ..."We're on the fast road to financial destruction, and I see a $20 trillion deficit in the few years to come.

Frankly, I think Shelby is considerably off. When you sit down and actually add up all these bail outs and stimulus spending and factor in the negative impact this economic crisis is having tax collections the case can make that we’re really looking at between $25 and $30 Trillion Federal Deficit. 

I’m sorry but the U.S. Dollar is going to be crushed by this growing deficit and while the stock market is up today and gold is down this can not be expected for very long.

Last week Jim Cramer of Mad Money fame said in effect that he didn’t worry about the U.S. Dollar falling in value because it would in his opinion stimulate exports, making our good cheaper and our country more competitive. So he says buy commodities and gold.

While the logic of the argument about the cheaper dollar initially makes sense on first review the more you look into the assertion the stupider it actually is.

The world has considered the U.S. Dollar the world’s reserve currency since the end of the Second World War. The world’s currency market is literally balanced on the value of the dollar. A cheaper dollar will force the kind of competitive devaluations that can literally destroy the entire international monetary system. To think our trading partners will stand by and watch the value of the dollar drop another 30%, 40% even 50% and not take steps to make competitive defensive devaluations is the height of either denial or recklessness.

Gold may be one of the only ways to firmly protect your financial nest egg as Washington looses all restraint and sanity.

We’re literally on course to a crushing devaluation of the U.S. Dollar and possibly a monetary panic of historic proportions. While optimism is evidenced today the danger continues to build. The upside in all this is I can offer you a safe harbor for 15% to 50% of your investment portfolio is physical gold. A $25 to $30 Trillion will bring $2,500 then $5,000 gold. It may be one of the only ways to firmly protect your financial nest egg as Washington looses all restraint and sanity.

Gold last week broke out over the $950 level and it’s a signal we’re likely going to see a new high price in this yellow precious metal. If you haven’t move physical gold into your self direct IRA please call my gold specialists at Finest Known at 1-866-697-GOLD (4653).

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Best Wishes,

James DiGeorgia


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