Will the Sun Come Up?
Research for Online Investors

by John Dalt

7/25/11

What would happen if congress doesn’t raise the debt ceiling?  Will the Sun will come up tomorrow?  What would happen if roughly half of the federal employees were laid off on August 3rd?  That would mean almost one million new people that are highly educated doing something productive, and paying taxes, rather than living on money forcibly collected from other productive people. Only in Washington would this sound like a bad idea.

Just imagine not so many people at the EPA to regulate things we can’t see, feel or taste in the interest of protecting us.  They have been cranking rules out to strangle electricity generation by the first of the year.  Maybe the government would decide just to close the Department of Education, after all they don’t teach any students and test scores have gone down.  Does anybody think they have done their job?

What about the Department of Energy.  This department was given the mission to make our country energy independent when it was formed in the 1970’s after the OPEC energy crisis.  Scorecard….Fail.

How about the Department of Agriculture?  Commodity prices are at all time highs.  We surely don’t need them anymore.  This agency was started in the 1930’s to pay farmers NOT to produce more food because there was a glut holding prices down.  These bureaucrats could all go buy 40 acres and a mule and try applying all of their theories to Mother Nature.

The list is endless of outdated and unnecessary government agencies that we simply don’t need…and this is the real reason the politicians don’t want the government to get smaller.  We would all realize what an utter waste the whole operation was.

The dueling press conferences continue.  We can’t seem to go a day now without one from the democrats then one from the Speaker of the House.  The progressive’s press conferences are shrill, painting a dire picture of the dark days ahead if the debt ceiling is not raised.  Make no mistake, it would cause a disruption.  But, think about it, the sun will come up tomorrow.  The U.S. government will be on the ultimate "Pay-Go.”

U.S. Treasuries would once again represent debt that was honestly incurred, and would be paid back with real dollars, not with more inflation.  Speaking of which, we wouldn’t need the Federal Reserve anymore to “manage” the value of the dollar if it were not used as a sponge to absorb deficit spending.

Obama would not be able commit money to bombing Libya without congress passing a bill to pay for it.  At the same time, they will have to either reduce another budget line, or increase the debt ceiling enough to borrow money for the authorization.

Michele won’t be able take Air Force 2 on a vacation with the kids and a few close friends to Spain, like she did a year ago.  Of course, the Congress could authorize the million dollar cost and just deduct it out of the food stamp program, or raise the debt ceiling.

Maybe if we went without a debt ceiling increase long enough the congress would look into the waste that has grown up in Washington bureaucracies.  Senator Tom Coburn M.D. (R-OK) identified $9 trillion in duplicated services and possible cuts in his “Back in Black” audit of the government that was released last week.  His office’s press release has links you can use to read his results and plans.

Raising the debt ceiling has taken front and center affecting the market this week.  Gold is hitting new highs today.  Interest rates are nudging higher.  If you are trading here, be careful.  A winner can become a loser in a few minutes.  Investors should watch their stops, position sizes and don’t be afraid to sell at a good target price.  Keep developing your list of stocks to buy.

The mailbag:
I wonder what the eurozone leaders mean when they say the bond holders "voluntarily" will roll over their maturing bonds for 30 years for less interest?  I have a hard time believing it is voluntarily, especially the private people like a "me" holding a CD..  I would not voluntarily give my money back to the ba*(?#s for another 30 years at nothing of an interest rate.  Is this what's coming here. . . "Selective default"  more like an  INVOLUNTARY DEFAULT—subscriber T.M.

John’s reply:  The government did it to GM bondholders.  After forcing interest rates down for the last two years so retired savers couldn’t make any money on their retirement savings, don’t ever discount the deceit they are capable of.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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