Deadline Looming

We still subscribe to the old idea of Sunday being a day of rest, even though retirement has provided whole weeks of Sundays, at least as compared with the old rat race days. But in many ways, Sunday is still a day for quiet reflection, especially if it includes a little spiritual rejuvenation. And while it generally is a slow news day, we are too well aware of the financial tsunami poised to wash over us this week as the clock ticks down to the federal debt ceiling deadline, which may, or may not, see the collapse of the US economy as Washington maxes out all of its credit cards on Tuesday. Some people are forecasting scenes of anxious Social Security recipients, and other retirees, staring at their empty mail boxes, or the electronic equivalent thereof, while others claim that such forecast are simply partisan hype and the government will somehow avoid a default through some last-minute brinkmanship. While we have generally expected the latter, time is now getting short and the worm in our brain is starting to re-consider the real possibility that Harry Reid and friends may not be up to the task of producing a rabbit from his hat.

Let's be clear, to coin a phrase. We wholeheartedly see this crisis as one of over-spending rather than a shortage of tax revenue. When the pres was pimping for passage of his health care juggernaut, many pointed out the effect that plan would have on the federal deficit. His response? Wait until we come back next year for funding and we'll see how those critics feel about the deficit. There is a subtle, but crucial, twist to this logic, which lies, in our belief, at the core of the problem. The Left pushes for programs solely on the basis of an oft-hazy perceived need, without thought to the source of funding. Then, when the bill comes due, taxpayers are told they must pay more to meet "their fair share" or be labelled heartless and mean-spirited. Any remaining shortfall is then put on our collective tab. What is so hard about understanding that you can't spend money you don't have without running up the deficit? John Boehner and Co. are the only remaining adults in the room, calling for a halt to this irresponsible run up to the federal Master card account. No matter which side blinks first, and especially if neither does, we could be in for one uproarious week of fiscal uncertainty.

What do we do now? It's probably too late to buy gold with the price over $1,600 per ounce. Gold may have a place in some portfolios, but it's not much use in balancing the family budget as it doesn't pay any dividend and it's expensive to buy and expensive to sell. Sell everything and go to cash? Theoretically possible but impractical and you have to be clever enough to know when to reverse the process. Did any of us ever confront the possibility of The United States as a financial banana republic?

Small, and not so small, investors have long used Treasuries as a safe-haven investment, and it's staggering to face the real possibility that the values of these securities are facing a downgrade within the next few days. While we support the Republicans in their efforts to scale back federal spending, there will be enough fallout from this scenario to cover the shoes of everyone, regardless of which side of the aisle they sit. And before the White house says it, this is not George Bush's fault.

So what does one do? Hold on tight, wait it out in the belief that any interruption in the financial markets will be short and reversible. Watch very carefully how this week unfolds. There really isn't another choice.