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trump could break through debt ceiling

From Birch Gold Group

Discord among Congress and the Trump Administration over the debt ceiling is about to come to a head. And it’s quite possible that the outcome will be downright bad for the American public.

As we discussed earlier this month, two of Trump’s cabinet members — Steven Mnuchin (Secretary of the Treasury) and Mick Mulvaney (director of the Office of Budget and Management) — are going head-to-head on the country’s debt ceiling.

To complicate matters further, now Congress is divided on the issue as well.

Let’s discuss what the dispute is all about, and what impact it could soon have on the economy.

$189 Billion: The Most Important Number of 2017

Essentially, the debt ceiling is the amount of debt the U.S. guarantees to pay. But it’s not just about new spending. Compounding interest on existing debt, plus spending approved by Congress in previous years (but are only now starting to take effect), is more than enough to require the ceiling to be raised.

But speaking of new spending… Trump’s ambitious plans to cut taxes, build a border wall, and invest heavily in infrastructure rely entirely on the debt ceiling being raised.

Daniel Gross writes:

All the fabulous deals [Trump] wants to do—cutting taxes, building a wall, dramatically expanding the military budget, not touching major entitlements—will require the issuance of massive amounts of debt. And he can’t accomplish any of them until the debt ceiling is raised. Worse, any of the goodies will have to be preceded by an unpopular piece of legislation that will increase the national debt significantly—requiring the cooperation of the same conservative Republicans who are currently giving Trump an ulcer over health care reform.

So what happens if we break through the ceiling?

If the U.S. debt burden surpasses the ceiling before Congress acts, there is a very short series of “extraordinary measures” the Treasury Department must use to keep the country from defaulting on its debt.

The simplest way to explain it is this: Once the debt ceiling expires, the Treasury is forced to — more or less — dip into the government piggy bank to keep the U.S. in good standing.

Congress can still act to raise the ceiling before anything catastrophic happens.


If they wait too long and the Treasury runs out of “extraordinary measures,” things start getting ugly very fast.

We got close to that breaking point back in 2011, when Congress dug in its heels and the U.S. got knocked with its first credit downgrade in history.

Now, we’ve come full circle.

The debt ceiling technically expired on March 16. Since then, the Treasury has been spending upwards of $2 billion per day as part of those “extraordinary measures” to service the country’s debt.

Here’s the real catch: The Treasury only has about $189 billion left to keep things afloat. Meaning that we only have about 90 days before our government is out of money.

If Congress doesn’t act to raise the ceiling soon — like Treasury Secretary Steven Mnuchin urged in a letter to House Speaker Paul Ryan earlier this month — the U.S. could find itself in another situation where its creditworthiness (and economic safety) is at-risk.

And with the divisive nature of the Republican Party, primarily the Tea Party wing and its aversion to anything even remotely related to federal debt, it’s highly probable that we get dangerously close to the edge yet again.

Relearning a Painful Lesson?

Remember how we said the U.S. went through its first credit rating downgrade after the last serious debt ceiling crisis in 2011? The event went down as an unfortunate but instructive lesson on the consequences of putting politics ahead of good policy.

But evidently the memory of the average politician or bureaucrat is shorter than we thought, because it seems history is repeating itself.

With about 90 days to resolve the issue, Congress is playing with fire. And the consequences might not be as minimal as a credit downgrade this time (although the country’s creditworthiness is vital to our economy).

Instead of a downgrade, there’s a frightening chance of an outright default, a completely unprecedented scenario in the country’s history.

Carson Block reports via Bloomberg:

In an ideal world, all sides would come together and not play politics with the debt ceiling again. Clearly that’s not the world in which we live. America’s partisan divide may now be so wide that a default will occur. That isn’t my base case scenario, but we will probably come down to the wire.

A Rare Opportunity

If Congress delays raising the debt ceiling, as it has done to great detriment before, there will still be one major benefit to offset the damaging consequences.

It’s actually rather simple…

If another credit downgrade occurs (or something worse), the dollar will more than likely crash. It certainly did back in 2011 — the last time we went down this road. In fact, as a result of the last major debt ceiling crisis, the dollar sunk to its lowest point since 2008 after the subprime mortgage crisis.

But when the dollar falls so sharply, something good happens to individuals holding gold.

You see, gold is priced in dollars. Based on how much the dollar is worth, it takes a certain number of dollars to buy an ounce of gold. That will never change, no matter the paper currency in use.

Therefore, when the dollar crashes, more dollars are required to buy that same ounce of gold. Suddenly, gold prices erupt as a result of simple economics and math.

If you’re especially confident in the federal government and its ability to stave off another debt ceiling meltdown, maybe you don’t need to make any changes with your savings. But if you have any doubt about how our bureaucrats will handle the coming crisis, today may be one of the best opportunities to buy gold.

  • Libya21

    Why do you headline it Trump will soon break through the debt ceiling? It is Congress who set the ceiling; set the tax rates; and set the budget? Congress is not working for you and me! They are power crazy crooks robbing us and taking care of themselves and their cronies. They should all be charged with crimes, jailed, and pensions removed! Congress is sworn to work for US ONLY!

  • Stephen Korup

    I read today that Obama personally made 629 million from “OBAMAcare” , and has purchased a home in Washington for several million dollars . I also found out that Michelle was given money to BURN from an account that is for purchasing gifts for Foreign Dignitaries , and now will get a pension of 600 +thousand a year .How does all of this happen ,doesn’t the treasury track any of this stuff ?

  • Joe Shmo

    In my opinion… When the top world banking organization supposedly used all of its resources last time to bail out our country from it’s “raise the debt ceiling” and the ‘the good old U. S. of A.’ from folding in on itself by shutting down the country into extreme helplessness, this banking organization was apparently heard to say, “Not Again!”
    Meaning, ‘there is no money to help back up the top bank organization, ‘next time’. Well folks, ‘next time’s is here again soon. To have anybody be ‘The Establishment’s Puppet U.S. President’ under this rigged System, have fun, run the country into the ground, as if to be a steward on a plane handing out packets of peanuts, and soda while the fuel totally runs out in a controlled freefall over the ocean, expect a huge crash that may soon happen. Of course, the politicians ‘know’ what’s going on!
    “Send the people to Heaven first, before you send them to Hell.”
    Picture total chaos by Catholic Socialist elites, ‘if it takes 500 yrs..’, to infiltrate a country they Protestant hate, every day is progress in their eyes. This October 31, 2017 is their goal to turn Reformer of October 31st, 1517 (Martin Luther) around.
    Now picture Trump as a ‘Grand Masonic Freemason Evangelical Catholic leader,’ of whom’s goal does he deliver his work? Yes, notice those dark clouds of the ‘New Roman Empire’ encroaching? We are in for a harsh ride is a our midst. Our country might fall, once the current ‘debt ceiling rise’ is denied. Dog eat dog world, and a foreign country take over (Russia?), now that is a horrific thought! The Bible does not mention our country, in the last days. The Genuine Article of Jesuit trained policy, dear old Donald, and his 19th cousin Hillary, on the cover of Time, November 14, 2016, says, “The End is Near” in smiles. Watch the “The Trump Card”. Now, ask yourself, are you saved by Precious Blood of the Lamb Jesus Christ? At this point, Salvation endurance is your only option. Trump is going for broke, once bank money collapses. Again, this is written, “in my opinion,” and not as a dummy.

  • Joe Shmo

    In my opinion…
    When your are a politician at that level, you are given ‘Special Privileges’ to ‘shut up and turn the other way’. Insider Trading is just one of the benefits.

    In my opinion…
    Yeah, Bathhouse Barry, and his tyranny friend Mike (Michael or Michelle) are living high on the hog now. To bad for the hog.

    Has anyone ever seen the movie, “Deliverance”?
    No.. no.. bad mind picture.

  • galtgulch

    Congress persons all take an oath of office to uphold the Constitution and to defend it against all enemies foreign and domestic, but unfortunately for all of us and our grandchildren, few of them give any thought to what they ought to do in order to keep their oath!
    This failure to understand that the oath is serious and not a mere ritual or rite of passage is at the root of our national debt as well as our loss of freedoms.
    Many citizens were impressed and inspired by an obscure obstetrician who held office for twelve terms from a Texas district…Ron Paul, who ran for President in 2008 and 2012 as a Republican. He pointed out that American foreign policy approved of such interventions as the removal of a democratically elected head of Iran and installation of a brutal dictator, the Shah of Iran, in 1953. Many suffered under his rule and subsequent interventions in the Middle East by the CIA in other countries in the region.
    It is no surprise that the 9/11 attack was an act of retaliation against US interventions called “blowback.”
    Ron Paul was prompted to enter politics after Nixon closed the gold window in 1971 and he advocated an audit of the Federal Reserve and its abolition and the restoration of the free market vision given to us by the Founders who had endured a hyperinflation of the Continental paper currency created to pay the men who stepped up to fight the British.
    The Founders beat the British at Yorktown, lived under the Articles of Confederation and became aware of the need for there to be a government over the former British Colonies. They were concerned that they had to assure that this central government never became a tyranny. So they only granted certain powers to it. The enumerated powers are listed in Article 1 Section 8 and include the power to coin money and to regulate the value thereof… Google Coinage Act of 1792 to discover that the dollar was defined as a coin containing 371 grains and four sixteenth of a grain of silver.
    There is also a punishment for debasing the currency of death in that Act.
    Notice that there is no authorization for their to be a central bank, just as their is clearly no authorization of a nationwide retirement system nor a nationwide health insurance system nor a nationwide disability system, among others that we have today despite the fact they are not granted in the Constitution.
    Read Griffin’s review of central banking in America in his revealing book The Creature From Jekyll Island. You will see that a handful of private bankers met in 1910 invited by J.P. Morgan and wrote the Federal Reserve Act which was passed into law by President Woodrow Wilson in 1913.
    The purchasing power of the dollar has eroded over 95 percent since. The Act prohibited anyone from asking certain crucial questions of those who controlled the Federal Reserve in order to assure the independence of the Federal Reserve from politics and whatever audits are permitted are shams which are superficial.
    Read Nullification by Thomas Woods, explore the archives at the Ludwig von Mises Institute website, the archives at the CATO Institute, the daily blog at the Future of Freedom Foundation website, fff.org
    Notice that the Libertarian party candidate got 4 million votes in the recent presidential election and their membership rose substantially.
    support http://www.CampaignforLiberty.com; http://www.studentsforliberty.org and http://www.YALiberty.org which are college student activists who are pro free market, limited government, pro Constitution and are growing exponentially already on over one thousand campuses with hundreds of thousands of student activists who understand these matters and what must be done to educate their colleagues until their are enough to win. They know as did Thomas Jefferson that a nation cannot remain ignorant and still free.