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Will Doomsday Bill Help Gold and Silver Shine?

Commodities / Gold and Silver 2012 Mar 06, 2012 - 02:16 AM GMT

By: Eric_McWhinnie

Commodities

In an effort to shore up its broken financial system, the European Central Bank recently completed a second round of its long-term refinancing operation. Around 800 financial institutions came to the ECB to borrow 530 billion euros in the form of low interest three-year loans. However, the new shot of liquidity is doing little stem the Greek tragedy. As of Monday morning, interest rates on Greek one year bonds have surpassed 1,000 percent for the first time ever. In comparison, interest rates on Greek bonds hit 100 percent for the first time in September. The dire situation in Europe has many wondering if the financial crisis in the United States could also worsen.


The state of Wyoming recently brought up legislation to launch a study into what the state should do in the event of a complete financial collapse in the country. The bill was rejected by the state House of Representatives, and would have allocated $16,000 for a panel of legislators and emergency managers to study various measures, including a new state-issued currency. “I guess a lot of people think if you’re trying to prepare for a disaster, it makes you seem crazy,” co-sponsor Kendell Kroeker said. “I was interested in it mainly because I don’t think there’s any harm in being well-prepared.”

Although Wyoming’s “Doomsday Bill” was defeated, it does not eliminate the need to prepare for financial distress. The bill’s sponsor, state Rep. David Miller, R-Riverton, explained that although he does not anticipate a major crisis hitting America soon, people should be protected against financial stress, such as the national debt exceeding $15 trillion with no signs of slowing down. Apparently, other states fell the same as Wyoming. Lawmakers from 13 states are seeking approval from state governments to either issue their own alternative gold and silver currencies, or at least explore it as an option.

“In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System, the State’s governmental finances and private economy will be thrown into chaos,” said North Carolina Republican Representative Glen Bradley in a currency bill he introduced last year. Utah became the first state to introduce its own alternative currency last March, when Governor Gary Herbert signed a bill that recognized gold and silver coins issued by the U.S. Mint as an acceptable form of payment.

As the financial situation worsens in the U.S., more states and citizens will find comfort in gold and silver as hard assets that can not be devalued through excessive money printing. New data shows that the U.S. monetary base, which is increased by the Federal Reserve, reached a record high of $2.8 trillion in February. Furthermore, America’s constantly increasing national debt is expected to cost more than $5 trillion in interest payments alone over the next decade, according to projections from the Congressional Budget Office. Interest rates on U.S. bonds are near record lows, and the CBO estimates they could rise to 5 percent by the end of the decade. However, if interest rates rise just one percentage point above the 5 percent estimate, it could add around $1 trillion to interest costs.

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2012 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors


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