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Wednesday, January 16, 2013

Debt Limit: Facts and Fiction

Washington, Jan.16, stock investment .- As the debate over whether the U.S. government should increase its borrowing capacity reaches a fever pitch, we offer a cheat sheet for readers to better understand the facts and fiction behind the debt limit
What is the debt limit?
How much is the debt limit?
When was the last time the debt limit was raised?
On August 1, 2011 was the most recent occurrence of a debt limit increase. A few days later, Standard & Poor’s downgraded the U.S. government’s credit rating from AAA to AA+. Prior to August 2011, the debt ceiling was last increased on February 12, 2010 to $14.294 trillion.
What happens if Congress doesn’t increase the debt ceiling?

Isn't the Federal Reserve monetizing the entire budget deficit?

Can the U.S. Treasury monetize its gold assets?

According to the U.S. Mint, the government holds 147.3 million ounces of gold (NYSEARCA:GLD). Certain legal
Why can’t a trillion dollar coin be issued to purchase debt?
The law does not restrict the U.S. Mint, at the direction of the Treasury Secretary, from creating platinum (NYSEARCA:PPLT) coins with an arbitrary value. And pundits have suggested a trillion dollar coin could be minted and deposited with the Federal Reserve and used to repurchase debt, thereby freeing up funds. However, such a move could put the credibility of the government’s creditworthiness at risk if the bond market interprets this strategy as a default. The “trillion dollar coin” idea was originally floated by a financial blogger as a joke.
In 2011, long term U.S. Treasury ETFs (NYSEARCA:TLT) with durations of 20+ years gained 33.96% in value, virtually matching their gains during the 2008 credit crisis. Intermediate term U.S. Treasuries with 7-10 year durations (NYSEARCA:IEF) gained 15.64% in 2011.  ... Continue to read.

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