>>The Treasury Department has already warned Congress of the danger. In a Dec. 28, 2005, letter, Treasury Secretary John Snow states, "the statutory DEBT limit, currently $8.184 trillion, will be reached in mid-February 2006 Unless the DEBT limit is raised or the Treasury Department takes
authorized extraordinary actions, we will be unable to continue to financegovernment operations."<<
The US Congress will do one of 3 things here. 1)It will raise the official US debt ceiling. 2)It will pass a "continued spending resolution". 3)It will eliminate the debt ceiling!
Given the fact that M3 will no longer be reported this coming March, I think the US is headed toward eliminating the debt ceiling. The new Fed Chairman, Dovish Ben Bernanke will eventually just buy the debt. That, in its turn, would cause another massive inflation of the total quantity of US Dollars in circulation. What's the real alternative here? If the US Congress continues to do what it has being doing since the debt ceiling was begun in 1917, it will raise it again before mid-March 2006. To stop borrowing would require the US federal government to operate with a balanced budget which would greatly reduce the flow of funds which the US Treasury is sending into the US civil economy. That action would bring about a US economic recession. Congress itself would not stand for this! After all, the entire US House of Representatives wants to get re-elected in November this year. So, let's get real here and face the facts: there will be no balanced budget. Given the fact that the Congress will go on borrowing, these new US Treasury debts will continue to be funded by the Foreign Central Banks. This "game" can keep on going a lot longer than credit bears think. Ultimately, it's in everyone's interest to keep this "game" going on indefinitely; for grave worldwide economic consequences will flow from any significant part of the world which slows or stops their funding of the US Treasury's budget deficits.
Yes, I know nothing lasts forever. But inflation is great for equities. So, enjoy the ride up if you can; for it is going to be some scary ride up. I say "scary" because the advance will be very dramatic and mind blowing. Very few will believe it. Even those who expect it (like myself) will shake their heads and find it hard to believe. It'll take guts to hold all the way up. There will come a point in time when the piper will be paid. But we've just gotten over a major crash of enormous proportions in regard to the Nasdaq and some of the high tech stocks and we've hardly even begun the advance yet.
This is a Bull Market and new all time highs are coming in regard to the Dow, S@P, and Nasdaq. We already have these new all time highs in place in regard to the Russell 2000, S@P Midcap 400, Dow Transports, NYSE Composite Index, and S@P 600 small cap index.
If you think you saw a bubble in early 2000, you aint seen nothing yet. That so called "bubble" will pale in comarison to what is coming.
Need I say:
I'm Bullish and in these markets. |
