Treasury to Announce U.S. Debt at $3.5 Trillion

Later today the U.S. Treasury is supposed to announce that the U.S. debt has reached $3.5 trillion dollars. Meanwhile the Whitehouse numbers are being reported at $248 billion. Now you may ask how can the numbers be so far off?

The Whitehouse doctors their numbers in an effort to hide just how much money they are spending. Add to these outrageous numbers the amount of future obligations for such things as Medicare, Social Security and such and you end up with numbers approaching somewhere in the $70 to $80 trillion range. Now that's some serious cash.

Remember when the Fed's stopped reporting M3, the measure of total currency in the system. At the time I reported here that I believed that the reason was to hide the amount of new dollars being created by the Fed's.

Well as it turns out, a fellow by the name of John Williams has developed a formula to estimate the current value of M3. You can find it here: http://www.shadowstats.com/cgi-bin/sgs/data. According to his calculations, which he has back tested and found very accurate, the government is creating money at around 10% this year alone.

Of course from our basic study of economics, this means that with more dollars chasing the same number of goods, prices go up. Since we are shipping most of those created dollars overseas, we haven't seen a huge noticeable increase in inflation but by Mr. William's calculations inflation is running somewhere around 9%. That is a shy bit more than what the government is reporting isn't it?

Now in the latest news, the treasury department has reported that it is illegal to melt down or export U.S. coins. Why? Because the value in the metal contained in pennies and nickels is worth more than the face value of the coins.

This recent news is like the government admitting openly that inflation is far worse than what is being reported. That is why the Federal Reserve is talking so aggressively about fighting inflation. They know, as we have known all along, that inflation is far greater than the measly 2% that has been reported.

How do you protect your investments against the destruction of a paper currency? You purchase foreign currency and gold. Since most of the world's primary currencies are also in full inflation mode, I would recommend gold, either by owning some physical gold, owning unhedged gold stocks, or owning shares of the gold etf, GLD.

Just 5% of your investments in some type of gold investment would provide a nice hedge against further dollar deterioration.

Now, I am not a registered financial advisor, so I cannot make specific recommendations, but you get the picture.