The Illusion of the U.S. Debt Ceiling

President Obama just signed a deal on Monday, Nov 2nd that raised the debt ceiling. It took the allowable U.S. debt from its current $18.5 Trillion mark to an astounding $20.5 Trillion limit.

While the U.S. debt ceiling is meant to control the amount a country spends, in America, it is working the other way round. The debt ceiling is now twice as high as it was in 2008.

Let’s face the truth. The U.S. Debt ceiling does not limit government spending at all. It is an illusion. Whenever the government comes to the edge of its borrowing budget, the Congress raises the limit.

Did you know that US government has raised the debt ceiling nearly 74 times since March 1962? The last increase should help run the country until the need for another debt ceiling arrives in about 2017 at $20.5 Trillion.

US debt has skyrocketed to newer realms of Government ruin. It is now six times the levels it had reached in 1990. Its rate of growth has even outpaced the US economy. Government debt as a percentage of GDP is now 101%. The highest since World War II.

Just take a look at these alarming US government debt facts:

  • The US is responsible for nearly one third of the world’s government debt.
  • The US, with only 4.4% of the world’s population has $18.3 trillion of debt.

 

The U.S. is responsible for at least 30% of the total government debt in the whole world. Not only is this lethal amount of debt dangerous for a country, but it could be the driving force behind the next recession.

The Federal reserve dropped its key rate to zero in 2008. This made borrowing as easy as playing with toys. Over the years, this easy money has flowed into the economy, while the government pays minimal interest on the treasury bonds it issues.

Thus, today, the US government borrows money at extremely cheaper rates than ever before.

Marc Faber, one of the most famous contrarian investors, knows this. He was the keen eye that predicted the crash 1987 and foresaw the Asian financial turmoil of 1997-1998.

While the US debt has ballooned to alarming levels, the interest rates have stayed low. It soon becomes evident that a financial crisis is lurking in the shadows of debt. This is the major reason why Faber is investing heavily in precious metals. Are you?