Federal, State and Local Debt/Deficits Keep on Growing Larger

“May 3 (Bloomberg) — Construction spending in the U.S. unexpectedly increased in March, propelled by gains in state and local government projects.” Here’s the story link: Debt Makes You Free?

Rather than help States and Municipalities balance their spending budgets and reduce their outstanding debt, the Federal Govt gave local contruction spending a boost in March by giving States stimulus money to spend on construction projects. This is non-recurring, unsustainable economic activity and perhaps it will help incumbents – mainly Democrats – gain some traction with the voters.

I would like to point out for those who missed the press release Friday, the Lt. Governor of NY State announced that next year’s NY State budget deficit would likely hit $15 billion, on top of this year’s $9 billion deficit…Add in California’s $20+ billion deficit and the red ink of some other big States like Illinois, Texas and New Jersey and the world wants Greece to cut back spending?

If you want to put the “lense” of truth on the above news, please read this commentary from James Turk. Here is a quote from his commentary that is directly from the BIS (Bank for International Settlements – the global Central Bank of Central banks) report entitled  “The future of public debt: prospects and implications:”

First, fiscal problems confronting industrial economies are bigger than suggested by official debt figures…As frightening as it is to consider public debt increasing to more than 100% of GDP, an even greater danger arises from a rapidly ageing population. The related unfunded liabilities are large and growing…looming long-term fiscal imbalances pose significant risk to the prospects for future monetary stability…unstable debt dynamics could lead to higher inflation: direct debt monetisation, and the temptation to reduce the real value of government debt through higher inflation.

Here is the link to Turk’s commentary – a must-read:  Gold Needed More Than Ever

There is no question that the recent move higher in gold, while the dollar has been moving higher, is directly related to a large flow of European money out of paper and into physical gold. Imagine what the price of gold will do when the world finally wakes up to the massive fiscal/monetary disaster brewing in the United States – a problem which by sheer size makes Europe’s problems look somewhat insignificant. Please note, you can not go by Wall Street’s reported Debt/GDP figures. The U.S. has a lot of hidden pockets of debt ($2.5 trillion in the Social Security trust) and massive debt guarantees that will eventually kick in ($6 trillion in guranteed FNM/FRE debt, not including FHA and FDIC debt problems).

As the BIS points out, the biggest risk is that Governments will start to address their debt repayment problems by printing money. This is how it’s always been done throughout history. The ONLY way to protect your wealth here is to move as much as you can into physical gold and silver – not paper gold frauds like GLD and SLV.

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