Friday Reader Q&A: Should I Be Concerned About the U.S. Debt Ceiling?

July 29, 2011

by Jerry Robinson | FTMDaily Editor-in-Chief

HOUSTON, July 29

It's Friday. And that means that its time for FTMDaily's Reader Q&A. Each Friday, we reserve our daily column for our readers and their questions. Whether you have a question about your money, our Five Levels of Financial Freedom, the global economy, commodities, or retirement savings, we invite your questions. (To submit your question, click here.)

Help! I Am Worried About the Debt Ceiling Crisis

Q: Jerry, I recently found your book, Bankruptcy of our Nation, while browsing at my local bookstore. I am so glad that I have found you as you seem to be saying so much of what I am feeling deep down. I am almost 58 years old and have a large amount of money in a traditional IRA. I am very concerned about how the current debt ceiling crisis is going to impact it, and my retirement. Should I cash out now and move everything to precious metals and other hard assets? Thanks from a new reader and listener. (Don G., Newark, NJ)

A: Don, you are not alone. Many of our readers have been writing in asking very similar questions. First, you should know that I consider the current debt ceiling debate to be nothing more than smoke and mirrors. It is classic political theater. Anytime the 24 hour news cycle begins talking about a certain topic non-stop, you can bet your bottom dollar there's a reason. 

Now, I certainly do not intend to diminish your concerns about the U.S. economy because you are rightfully concerned. America is in deep fiscal trouble. However, I believe that the debt-ceiling debate is a huge diversion from the real concerns facing our nation.

Will Washington raise the debt-ceiling? Of course they will.

Will America default on its debt? Of course it will… eventually. But not yet, in my opinion. Money can still be printed. (Those with the global reserve currency need not fear default when they can run the printing press.)

You see, I have learned to virtually ignore the 24 hour news cycle. It is worthless journalism. It avoids talking about our nation's most pressing problems and therefore can offer no real solutions. Occasionally, when I am needing a bit of entertainment, I will turn on the mainstream media.

The mainstream propaganda machine has been manipulated by Washington, and the elites, for decades. This debt-ceiling debacle is no exception. How? 

Washington knows that our economy is based upon faith. Don, in today's economic system, it all boils down to perception, and managing perceptions.

Washington has found a great opportunity to "manage perceptions" through the debt ceiling debate. While concerns mount over China's future and over the Euro-zone debt crisis, the U.S. has the opportunity to "solve" a major financial crisis: namely the debt ceiling crisis. I believe that those at the very top level of Washington are using this debt-ceiling "dilemma" to show global investors that the U.S. is capable of solving its own financial problems… (unlike those confused Europeans, etc.)

If I am right, we will see a "solution" to the debt crisis next week. The result? The financial markets will be lifted as uncertainty over an immediate debt default subsides.

U.S. government bond yields will drop. 

And most importantly, the U.S. dollar will rise against the Euro.

Gold and silver could also drop slightly on the "good" news. This dip could represent another good buying opportunity.

Don, since you are 58 years old, you are almost eligible to begin taking penalty-free withdrawals from your IRA. If you liquidate the IRA before you are 59 1/2, you will face a 10% penalty. I would personally not do this. Instead, I would work with a trusted financial advisor to help you allocate your retirement funds in such a way in which you can benefit from the tough economic times ahead. If you would like to find a faith-based financial advisor in your area, feel free to use our free financial advisor referral service here. 

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Until Monday,

Jerry Robinson – FTMDaily.com

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Jerry Robinson is an economist, published author, columnist, international conference speaker, and the editor of the financial website,FTMDaily.com. In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week's economic news.

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