Thursday, 21 July 2011

Raising The Debt Ceiling Does Not Fix The Problem

The idea that an increase in the debt ceiling is a solution to anything is nonsense. The event would be simply a can kick forward for a very short period of time. Increasing debt is not a solution to a debt problem. It actually makes the problem worse It is an act of extending your Federal credit card borrowing line so you can use it to pay your mortgage.

Calling increasing the debt ceiling a solution to a debt problem is too stupid to be stupid. The unwind is deeply entrenched since the failure of OTC derivatives in 2008. There has been no meaningful intervention in this economic downward spiral at the level of the cause. The downward spiral therefore continues unabated.

All downward spirals go to zero unless an intervention takes place at the level of the cause of the problem in the first place. OTC derivatives are what turned a four year correction into the greatest economic accident in human history.

OTC derivatives only go one way in size and that is up. Changing the way nominal value is determined does not solve the problem. All that does is add camouflage to the problem. It does not solve it.

$1600 in gold is simply another round number which will create drama, but no opposition to the increasing price.

Nothing additional is required for a higher price of gold. The damage is done. The debt of the entire 
Western world is beyond out of hand. The so called solution, just like raising the debt ceiling, will be acts of kicking the can down the road.

We have come to the end of the road. The result of no financial discipline anywhere in the Western world is unfolding.

Gold will challenge $1764 where a hyperbolic price appreciation will start.


Jim Sinclair of

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