Ready for what? For the last sixteen days of the US election campaign, and for what may happen before the votes are cast on November 2. One thing is for sure, if it doesn't happen before November 2, it is as close to certain as anything which has not yet happened can be that it will happen not too long after November 2.
Last week, we published the data on the major new highs for $US Gold in 2002 and 2003. We pointed out that in both years, Gold set highs in the first half of the year and then went on to exceed those highs late in the year - December in 2002 and November in 2003. Finally, we pointed out that having set these new highs for the year, the $US Gold price accelerated upward to and beyond the end of the year.
There is no necessity for Gold to repeat this pattern this year, of course, although it has repeated the rest of the patterns set in 2002 and 2003 with eerie precision. One, amongst many, of the reasons for this is that in both 2002 and 2003, the US Congress got all in a tangle over a political bunfight around raising the Treasury's debt ceiling. In 2002, the Congress wrangled for nearly three months before passing (by ONE vote) a $US 450 Billion rise in the ceiling - to $US 6.4 TRILLION - on June 27, 2002. The "debt to the penny" hit that ceiling by the end of 2002. Then in 2003, the Treasury's debt "subject to limit" was frozen $US 25 million below the new debt ceiling for over 90 days starting in February. In the last week of May 2003, Congress passed a bill which, amongst other things, boosted the Treasury's debt limit by $US 984 Billion to its present level of $US 7.384 TRILLION.
Treasurer Snow started "warning" Congress about the necessity to raise the debt limit again in July this year. He started warning vociferously in August and has kept doing so at every opportunity ever since. On October 14, the Treasury's debt "subject to limit" hit a level $US 25 million short of the ceiling (the level where it was frozen for three months last year). Mr Snow went into the old act of shifting money around and stripping government employees' pensions in order to "run" the government until the Congress get around to passing another debt limit increase. Congress is not due to re-convene until November 16.
Now, let's look at what was happening in the lead up to these THREE debt ceiling rises. Yep, that's THREE debt ceiling increases in less than two and a half years - assuming that the post 2004 election Congress raises the ceiling when they come back in mid November. They'd better.
When the wrangle over the debt ceiling heated up in the second (calendar) quarter of 2002, the US Dollar was at the beginning of its bear market. Most observers had not yet acknowledged that the Dollar was in a bear market, and the Treasury/Fed mantra of a "strong Dollar policy" was still accepted globally with hardly a questionmark being raised. Happeneing as it did less than six months after 9/11, the Bush Administration had not yet had a chance to dissipate the "good will" of the rest of the world. And, the US bond and real estate bubbles were still very much alive and rising fast.
Fast forward a year to the debt ceiling wrangle of February/May 2003. Of course, right in the middle of this wrangle (and not as a coincidence), the Iraqi "war" was fought and - according to Mr Bush's famous speech on the aircraft carrier - "accomplished". The US had gone into the war despite the forecefully made protests of the vast majority of the rest of the world, giving US foreign "policy" and respect for the US in the rest of the world a fatal blow, from which the US continues to suffer.
In the intervening year since the 2002 debt limit rise, US stock markets had gone through two "near death" experiences, in September/October 2002 and again in early March 2003. By the time the debt limit was raised in 2003, nobody (except the officials at the US Fed and Treasury) was in any doubt about the US Dollar bear market. The one thing that still held firm was the seemingly insatiable appetite for US financial assets (mostly Treasury, agency, and commercial debt paper) being displayed by Asia in particular.
Fast forward another one year and a bit to today. The $US 984 Billion increase in the debt limit imposed at the end of May 2003 has lasted less than a year and a half. Over that period, the global fiscal and financial position of the US has worsened with sickening speed. The Japanese are no longer directly intervening in the currency markets to support the US Dollar. Foreign commercial demand for US interest-bearing securities has long since dried up. Even foreign Central Bank demand has visibly waned in recent months. US debts and deficits of all descriptions have accelerated into the red at near blinding speeds.
The $US index has not yet dipped below its February 2004 lows, but it is now at its lowest levels since February. Official US interest rates are on the rise, not to "damp down US growth" - of which there is none - but to give foreign investors some semblance of an excuse not to dump their US paper "assets" and run for the hills. US stock markets are once again teetering with the Dow having dipped back below the 10000 level this week. To a clear-eyed individual, the US is looking like one of the riskiest places in the world to invest.
It is universally known that if the US Presidential election were to be held in almost any other nation on earth (yes, even in Australia), the incumbent President Bush would go down in a landslide. But it is being held in the US. It is a safe bet that most of the rest of the world is fervently hoping that Mr Bush will lose. The reason for this is not necessarily because of the lies told about Iraq and the trampling on America's freedoms perpetrated over the last four years, it is the horrified realisation of what four more years of the "policies" of the present Administration might lead to.
It is crystal clear that the present trajectory of the US government is one which makes fiscal and financial collapse utterly inevitable. And because the rest of the world still relies on the US and its Dollar as the foundation of the global financial system, those clear eyed indivduals know that no nation will escape unscathed from a US financial meltdown, whatever its magnitude.
Is Mr Kerry expected to "solve" these problems? No, he isn't. But a new Administration would at least bring with it the possibility that the world will not be subjected to more of the same. And in addition, a repudiation of the Bush Administration on November 2 would send the rest of the world the message that the present US exectutive branch of government has NOT and is NOT acting in the name and with the approval of the American people.
For the third year in a row, the US government is up against its borrowing limits. And as each borrowing limit has been reached, the fiscal and financial condition of the US has worsened. It has NEVER been as bad as it is now, in the final throes of a US Presidential election. The only question left is whether the wheels will fall off before, or after, the US election.
That the wheels WILL fall off is certain. Are you READY for that? Yes, of course you should have minimal debt, Gold as financial insurance, and as little exposure as possible to paper assets, especially those denominated in US Dollars. But above and beyond all that, you need to be in the position where you acknowledge the gravity of the situation to yourself. That way, you will be neither surprised nor blindsided by inexorably coming events.
Financial debacles are just that, financial debacles. The world does not stop turning, nor does the sun stop shining. People still learn, teach, trade, work, create, and enjoy life. What is going to be sorely hit is not REAL wealth, but merely paper claims to real wealth. When you think about the coming FINANCIAL debacle, think about this. In times of financial strife, wealth returns to its rightful owners. The rightful owners of wealth - real, physical, existing, functioning producer and consumer goods and services - are the ones who create it - NOT the ones who "buy" it by issuing promises to pay which they have no intention of honouring.