Addison Wiggin

We’re now four days into fiscal year 2013.

[Yes, we know. But please try to contain your excitement.]

As of Monday, Oct. 1, the national debt stands at $16,159,487,013.300.35. This means the government racked up $1,369,146,684,743.20 in new liabilities last year.

We can confidently predict that with the usual accounting games, the “official” 2012 deficit announced next week by the Treasury will be somewhat less.

What’s one of the telltale signs of addiction? Denial.

“The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth,” writes Pimco’s Bill Gross in his latest monthly missive.

The United States, Mr. Gross submits, sits squarely within a “ring of fire” on the following chart. Its deficit in fiscal 2011 was 8% of GDP — worse than Greece. Throw in future liabilities for Social Security, Medicare and Medicaid and the “fiscal gap” runs closer to 11% of GDP — much worse than Greece.

“Look at who’s in that ring of fire alongside the U.S.,” Gross writes. “There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors.”

“Unless we begin to close this gap,” Mr. Gross goes on, “then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline.”

Investment conclusion: “Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the ‘Ring of Fire.’”

Hold that thought for a moment…

As of this week, Uncle Sam is only $235 billion away from hitting the “debt ceiling” yet again. Assuming the feds keep up fiscal 2012’s pace, we’ll hit the ceiling on Dec. 3 — 60 days from now.

Undoubtedly, there will be squawking in Congress, but in the end, they’ll vote to raise it. Which brings up something else we can predict with confidence…

To underscore the point, Gross’ underlings issued a white paper this week. It said, “The latest round of quantitative easing made gold even more attractive, and owning the metal should be considered as part of a diversified portfolio.”

And a well-balanced breakfast.

“I find myself,” says EverBank’s Chuck Butler, “continually explaining to people that don’t own gold (or silver) that it’s not a useless, barbaric relic that people that don’t own gold like to refer to it as.

“But once investors own gold (or silver), they see what all the hubbub is about. They see what countries around the world are doing to their respective currencies, and if there is a financial catastrophe, then gold is the only asset that can offer protection. I tell people that owning gold (or silver) is like an insurance policy for your wealth. And just like any insurance policy, you hope you never have to really use it, but if you do have to use it, you’re happier than a lark that you had the insurance!”

Cheers,
Addison Wiggin

Addison Wiggin

Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.

Recent Articles

Why You Should Be Prepared for Both Inflation and Deflation

James Rickards

Today's investment climate is the most challenging one you have ever faced. This is because both inflation and deflation are possibilities in the near term. Most investors prepare for one or the other. But today Jim Rickards explains why preparing for both inflation and deflation is absolutely necessary. Read on...


The Real Black Friday: When Oil Prices Begin to Climb

Byron King

Byron King observes the real Black Friday. It actually happens tomorrow... the day OPEC meets in Vienna. With wisdom on their side it will be the day they turn the corner to profits in a big way. The outcome of their meeting could be great news for US based oil producers. Either way, the energy revolution in the US rolls on...


Tip of the Day
3 Travel Secrets that Will Make Any Trip More Pleasant

Chris Campbell

Chris Campbell is going home for the holiday. With a storm ready to hit Baltimore, his flight might get cancelled. Inside today's Tip of the Day, he shares his best-kept travel secrets for beating the herd, getting compensated, and upping your chances of getting bumped up to First Class. Read on...


How Retail Investors Could Double Your Money In 14 Months

Greg Guenthner

Stocks keep rising - and people are finally starting to believe this bull market is for real. That means one thing: a lot of ill-informed, rookie investors (AKA retail investors) are starting to come back into the market. And that's creating a unique profit opportunity. Greg Guenthner explains...