Debt ceiling to be ‘temporarily suspended’?

Precious metals and commodities enjoyed another up day yesterday, with steady but unspectacular gains. Global equities are hitting levels not seen for four-and-a half years as investor confidence grows. Sales of Silver Eagle coins in America have surged to an all-time record high this month.

(Chart courtesy of ZeroHedge)

We’re stuck in a sort of no-mans land as far as the economy is concerned at the moment. On the one hand, stock markets are roaring to new highs with seemingly every passing day, with pundits on financial television talking up the prospects of new bull markets in general equities. On the other side of the railroad tracks, however, US consumer confidence dropped this month to its lowest level since November 2011, along with troubling developments in the debt ceiling debate: James Turk notes in his latest King World News interview that the House of Representatives has just voted to “temporarily suspend” the debt ceiling until May 19. In effect – and assuming that the president and Senate agree to the House’s proposal, which is highly likely – this gives the US government a blank cheque to spend as much as it likes from now until May 19. And after that date, anyone care to bet that Washington will agree to a new debt limit? If so, Obama’s got an oceanfront property in Illinois to sell you. As James says:

“But here's the really important point: These two words used by Bloomberg in reporting this event – temporarily suspend – are chilling… These are the exact same two words that Nixon used in his August 15, 1971 speech announcing that he was breaking the dollar's link to gold. “His temporary suspension has now lasted 42 years, which is the key point I am making here. This suspension of the debt ceiling is not going to be temporary. Each time it comes up for consideration, the politicians will just keep extending the suspension again and again. They will always take the soft political option.”

As dollar-destructive measures go, this latest wheeze could take some beating.