What's gold and silver got to do with the debt ceiling?!

It's becoming obvious that the U.S. economic recovery is a joke. Any figures that show otherwise have been cherry picked or distorted. Did the FED taper? No! Will the debt ceiling rise once again...? Yes. The FED isn't in a position to let the economy correct as it should, QE is the "recovery", they can't stop now....

Gold and silver prices may go down, as investors sell to increase their cash base. But the repercussions of all the uncertainty and shut down, is a clear indicator that  things are getting a lot worse. It's difficult to predict what the implications are for precious metals short term, long term however, it would be prudent to invest while the price of gold and silver are still reasonable. 

Simon Popple of Moneyweek puts it like this...

"So why is gold so valuable?

You don’t need a PhD in economics to spot the important difference between gold and fiat money, like US dollars. Gold has always acted as money, because its supply is fixed and small, so its value can’t be destroyed.

Fiat money has always failed, because its supply is infinite, and when push comes to shove, the authorities create too much of it and destroy its value.

Just a reminder – the Fed announced on 18 September that it had no plans to slow down its money-printing programme. It plans to keep printing dollars at a rate of $85bn per month.

When debt and inflation collapse the US economy, the US dollar’s reign as global reserve currency will be over. But what will replace the dollar? The new currency will be:

• globally acceptable,
• widely held,
• portable,
• divisible, and
• backed by a globally recognised ‘real’ asset with known inventories and steady supplies.

I firmly believe that gold will be that asset. Am I alone in my thinking?

“As the international community attempts to take on these challenges, gold waits in the wings. For the first time in many years, gold stands well prepared to move once more towards the center-stage. This could be the start of an immensely important phase in the history of world money.” - Official Monetary and Financial Institutions Forum (the OMFIF is a global think-tank for central banks and sovereign wealth funds).

Due to its high liquidity and its unique characteristics, gold is increasingly used as collateral. Following Eurex, CME Group, the International Exchange and JP Morgan, LCH Clearnet, the largest clearing house in the world, now also accepts gold as collateral.

OMFIF recommends the inclusion of gold in the IMF’s special drawing rights (SDRs). This possibility was also mentioned by the governor of the People’s Bank of China. He regards SDRs as a “light in the tunnel of reform of the international currency system”.

SDRs are a currency unit introduced by the IMF, which isn’t traded on foreign exchange markets. Currently the US dollar has a weight of 41.9%, the euro 37.4%, the Japanese yen 9.4%, and the British pound 11.3%.

Apart from gold, the ‘R-currencies’ (Chinese renminbi, Indian rupee, Russian ruble, Brazilian real and South African rand) are also supposed to receive a higher status in the international currency framework and are to be included in the SDR basket.  The growing calls for repatriation and audits of state-owned gold reserves also illustrates the growing importance of gold. Central bank-buying amounted to 534.6 tons last year. That is the largest quantity since 1964. In 2013, the IMF expects a net amount of 550 tons.

We’ll get used to the Fed continually pushing the ‘taper’ deadline further into the future. The Fed can’t stop printing money, so it won’t. And that will ultimately be its undoing."