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It’s almost that time again …
No, I’m not talking about the rapidly approaching start of the NFL season … although that is a happy coincidence.
I’m talking about that time-honored tradition in Washington, D.C.: Fiscal Follies, 2017!
It’s one of the longest-running dramas on Capitol Hill: The dreaded debt-ceiling debate.
Well, buckle up. The latest rendition is about to play out all over again in September and into October, when the U.S. Treasury runs out of money. That is, if Congress fails to act to raise the debt ceiling (again) by then.
Making things even more-exciting this time is President Donald Trump playing a lead role in the 2017 production. Which means anything can happen … and probably will.
Of course, the D.C. debt-ceiling drama has been going on periodically for decades. It doesn’t always attract much attention, except for the occasional threat of a government shutdown.
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| The debt-ceiling debate is one of the longest-running dramas on Capitol Hill. |
The 2011 production brought down the house … literally, after a particularly nasty showdown that year led to an unprecedented credit-rating downgrade for U.S. Treasury debt.
That fiasco cost American taxpayers an extra $1.3 billion in higher borrowing costs …
And it coincided with the last stock market correction of nearly 20% in the S&P 500!
Is history about to repeat in 2017?
With Republicans in control of both houses of Congress and the White House, you would think a debt-ceiling extension is a done deal. And congressional leaders sound pretty confident that they can take action before the late-September deadline.
Of course, they were confident about repealing Obamacare, too … but it didn’t happen. And now, occupying the White House is a president who’s on record saying the federal government “needs a good shutdown.”
Adding to this year’s debt-ceiling anxiety is the fact that Congress doesn’t return from summer break until after Labor Day. That gives lawmakers just three weeks to work out a deal and pass a bill to raise the debt ceiling.
Fixed-income investors are getting nervous. Borrowing costs are on the rise already, as you can see in the chart above. And well ahead of the Sept. 29 deadline. Interest rates on 3-month T-bills have jumped to the highest level since the 2008 financial crisis.
Only a portion of this move can be attributed to the Fed raising benchmark rates. Some institutions are avoiding T-bills with maturity dates after the end of September, when the Treasury will technically run out of cash to pay off its obligations.
None of this is really surprising to me. That’s because nothing in Washington … or on Wall Street, for that matter … has changed since the last financial crisis hit our economy like a Category 5 hurricane in 2008.
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In fact, in many ways it’s gotten even worse.
Total U.S. debt at all levels — government, business and consumer — is a staggering $175 trillion today. Much higher as a percentage of GDP than at the start of the financial crisis.
Undoubtedly, Congress and the White House will figure out a way to kick the can further down the road yet again. Perhaps only after some more fiscal drama in the weeks ahead.
But don’t kid yourself that they can somehow diffuse the ticking time bomb of debt. The ultimate day of reckoning is fast-approaching.
Good investing,
Mike Burnick
P.S. Don’t fall victim to the mistake too many gold investors make. Let me be clear: I’m not issuing this warning because I think that gold is on the verge of a terrible bear market. Quite the opposite, actually. I believe the next leg up of the bull market in gold is starting RIGHT NOW — and I want to help you avoid a mistake I see far too many gold investors make. Read More Here …
Mike Burnick, with 30 years of professional investment experience, is the Executive Director for The Edelson Institute, where he is the editor of Real Wealth Report, Gold Mining Millionaire, and E-Wave Trader. Mike has been a Registered Investment Adviser and portfolio manager responsible for the day-to-day operations of a mutual fund. He also served as Director of Research for Weiss Capital Management, where he assisted with trading and asset-allocation responsibilities for a $5 million ETF portfolio.
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The debt ceiling was raised 18 times under Ronald Reagan and 7 times under George W. Bush. It was also raised 5 times under Obama but as noted above not without some drama. The pattern seems to have been under Republican Presidents Republicans in Congress are budget arsonists while under Democratic Presidents they are budget firemen. Democrats on the other hand look at debt as free money. This time may be different as Democrats will undoubtedly take a page from the Republican playbook and oppose everything to get their spending protected. Republicans are split between the crash the government and bring on the depression crowd and the OMG my investments are at risk crowd. Throw in the Republicans’ desire to cut taxes on billionaires and corporations while increasing bloated military spending and you’ve got a runaway mine train heading for a washed out bridge. We are however safe from anyone actually proposing raising taxes and cutting spending equally.
Well Silver do as good as gold in the next bull market? Do u think silver is good investment?
I’m past 66 so it would not affect me but I’m waiting for the day when the Social Security full benefits age begins to go in the other direction and starts to move down to then past 60 as a job creation effort. Think of how many older brothers will be upset when they have to wait to 60 then watch a younger brother get the same at 58. And the cost just print and borrow more “money”. It will make the Obama era orgy of funny money pale in comparison.
All I can say GOD HELP US.
Mike Burnick,
I get my real wealth report monthly and now for life as I signed up and paid for a life membership. I LOVED LARRY, and he taught me a lot over the 5 years I interacted with him from around the world right up until his death. I was very upset and shocked when he passed. Mike, in this months Wealth Daily, you made several suggestions to buy into a few gold based commodities, some safe companies that are doing pretty good. Yet the last article I read from you which I questioned you about in an e- mail basically said, wait till I pull the trigger and do not buy till we get a bottoming out in Late November for Gold Stocks, Miners, Juniors etc as there is a bottom coming but not for a few months. So you tell us to buy in in the Wealth Report of up to 3-5% of our core holdings, and yet the last printed update you sent out, you told us to sit, hold on, and wait for a buy up signal directly from you! – MY QUESITON IS—————WHICH IS IT? Buy now 3-5% if not on board, or sit tight and wait? Can you help me here please.!!!!!!!!!!!!!!!
Thank you. Stephen Ettinger
Customer/ reader / Investor.
I am a Real Wealth Report Lifer. signed up for it. On the books for ever. Can you send me the Report Mike wrote about his #1 Junior Miner I have not read about? I would like to receive it as a lifer that bought in several weeks back,.
Thank you.
Mr. Ettigner
Another higher debt ceiling,who has got the balls,to just attempt to fix it…If nobody wants to know about it…then we are truly DOOMED
Thanks Mike! We are a debt rich, cash poor society. The Fed Reserve is sitting on trillions of $ of bonds. I suggest that they sell some and deposit the receipts with the US Treasury. The cash could be used to ‘make America great’ again.
I submitted to get my free book and reports but it did not work.
I am a subscriber.
It also looks like your gold chart is a bit to early with the gold price going down.
US legislators should simply REMOVE CEILING on debt. There is a future generation to pay.
Dems and Reps are all the same!!!!Drain the swamp!!!!!Wouldn*t it be refreshing to see people out to help America and not their own selfish needs?God, please open our eyes and heartsand work through Donald to stop kicking the can down the road and protect us ( US) from ourselves !!!!!! Happy Camping !!!!!!!
Mike says all of your fears about the Donald are unfounded what’s the matter with you? Can’t you see that all these corporations are still going to get deregulation and tax cuts with this administration of course they are!
There’s no need to be alarmed; the Donald is a top-notch businessman. Put your trust in Donald; he can do it. As long as you don’t ask him how.
These investment experts are in more denial than Hillary on Election night.
Markets traditionally go up when the government is shut down. Fewer scary headlines.