THE ONE - TWO PUNCH!

Bernanke and the Debt Ceiling

by Charles Goyette

Not long after the State of the Union address, the Congress voted to substantially worsen that state, delivering a one-two punch directly at the value of the U.S. dollar. Not light jabs, but crippling body blows that will leave the prosperity of the American people reeling. The damage this combination of monetary and fiscal hits will do is being telegraphed in advance: first the monetary blow, as the Senate confirmed Federal Reserve Chairman Ben Bernanke for another four-year term; next the fiscal blow, as both the House and Senate approved another increase in the statutory national debt ceiling. The new limit, a debt increase on steroids, adds $1.9 trillion to bring the ceiling to $14.3 trillion, an amount roughly equal the U.S. gross domestic product.

When freshman Sen. Barack Obama said that a Bush debt-ceiling hike was a sign of "leadership failure," he was right. When Bush came into office the debt ceiling was less than $6 trillion dollars; it was $11.315 trillion when he went out the door. Bush presided over seven increases in eight years. In less than a full year of Obama's presidency, the debt ceiling was lifted twice. This new increase is his third.

Just the increase in the national debt under the joint leadership of Bush and Obama in the last two years is almost three times the entire federal debt accumulated between the nation's founding in 1776 and 1980.

Because long-term increases in sensitive barometers like the global price of oil and gold are a reflection of the world's assessment of the prospects for the dollar, a referendum on the U.S. debt and America's fiscal irresponsibility, it should come as no surprise that under Bush and Obama, increases in the national debt ceiling have been a harbinger of higher gold and oil prices.

Gold tells the story in detail. In November 2004....

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