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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
May 16, 2011
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Less than a week before Mr Boehner’s remarks about cutting spending MORE than the amount of the debt limit hike, his colleagues in the House were all saying that “political reality” ruled out any cuts to Medicare or other government “entitlement” programs. Without DEEP cuts in these programs, Mr Boehner’s proposal is utterly impossible - UNLESS US taxes are raised substantially. But Mr Boehner doesn’t want taxes - or present tax loopholes - touched at all.

Here is what Mr Boehner had to say: “It is true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process”.

When the Treasury’s debt limit is finally raised, it will be the 75th raise since March 1962. None of the previous raises came with any steps to reduce spending or reform the budget process whatsoever. That is one very good reason why the limit has gone from $US 300 Billion in 1962 to $US 14,294 Billion today.  It is also one very good reason why the US government has not run a GENUINE surplus since 1960.

In the 50 years since 1962, the US has had 22 years of Democratic Administrations - including the current Obama Administration. The Republicans have held the White House for 28 of those 50 years. The last genuinely fiscally responsible Administration was under Republican president Eisenhower - 1952-60. Since then, all the REALLY big ratcheting up of Treasury debt totals have taken place under Republican Administrations, largely due to the fact that both the Reagan and Bush (the younger) Administrations cut taxes WITHOUT cutting spending. Now, Mr Boehner wants to cut spending without raising taxes. Not only is it much too little much too late, but there is no way he can do it. . .

The potential danger to global financial markets and to the US Dollar will grow steadily with every day between now and the passage of a new debt limit for the US Treasury. But it will become acute if there is no such agreement - even for a short-term rise - after the Fed scheduled end of QE 2 on June 30. Ever since the latest Fed monetisation began at the beginning of November, the US central bank has been the biggest single “buyer” of US government debt. Any slackening in the “demand” from the Fed BEFORE there is a new debt limit in place puts the entire US Treasury debt structure under increasing risk.

Don’t forget that despite the ocean of rhetoric, there have as yet been no concrete steps whatsoever to either rein in government spending or increase government revenues. Such steps as were taken in the continuing spending resolutions earlier this year were derisory in the extreme. And even here, the numbers were arrived at by cutting back on planned increases in spending, not by actually spending less.

For months, we have been hearing about plans to cut the deficit by multi $US TRILLIONS over a decade or more. None of these plans cuts the debt by one penny. All they do is claim to slow down the rate at which the debt is projected to grow. Unless SOME credible plan is put forward to STOP the growth of Treasury debt, the future is certain. That future is that at some point, global revulsion over the sheer magnitude of the US Treasury debt they are expected to keep on absorbing will spill over into a buyers’ “strike”. At that point, the Congress and the Obama Administration will have a choice - stop the borrowing or destroy the currency. Historically, there has never been an exception to this one. . .

The Fed knocked that on the head in July and August 2010 when it started to talk about QE 2.

Now, once again, we are nearing the official end of a period of Treasury debt monetisation just as the US government and Treasury reach their “credit card limit”. Last time, the Treasury’s limit was raised by $US 2.19 TRILLION. That has now been used up so the debt is that much bigger. Short-term rates on US debt paper can’t go any lower, so servicing costs have nowhere to go but up. The Fed cannot stop monetising until the US government stops borrowing. And there is NO prospect of that happening. . .

The one thing we do know is that the US government has drawn itself not one - but THREE lines in the sand. They will cross them on May 16, on June 30, and on (or about) August 2. The “confidence” of the American people and of the global financial system is about to face its sternest test yet.





Ó 2009 – The Privateer

(reproduced with permission)


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