With gold and silver strong as of late, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary, “(Bill) Gross warns that 75% of the US budget is nondiscretionary and is entitlement-based. With Medicare, Medicaid and Social Security, notes Gross, we are seeing $1 trillion deficits as far out as the eye can see. These three entitlements amount to 44% of Federal spending and their share is steadily rising.”
Richard Russell continues:
“Concludes Bill Gross, "Unless entitlements are substantially reformed, I am confident that this country will default on its debts, not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies -- inflation". . . . . "You must attack entitlements," warns Gross, "and make 'debt' a four-letter word."
Bill Gross manages the largest bond fund on the planet. Gross means what he says. I'm guessing that Gross thinks that the US will NOT ACT until the crisis is actually upon us. The crisis that I believe Gross foresees is a collapse of the US dollar at a time when no foreigner will want to buy Treasuries. In anticipation of such a disaster, Gross has eliminated all US Treasury bonds from his huge, multi-billion dollar fund.
I ask myself, "Is this our fate? Is Congress going to allow the dollar to crash, will Congress, through its procrastination, allow the US to lose its greatest advantage -- the reserve status of the US dollar? Could this really happen? A collapse of the dollar is too grotesque to even contemplate. Yet I am definitely considering that such an horrendous set of circumstances could occur.
I've shown chart after chart of the US dollar. I've shown how the Dollar Index has been violating support levels. To refresh your thinking, I've included an up-dated chart of the US Dollar Index (above). What we see here is a giant head-and-shoulders top with a right shoulder that is in the process of breaking down.