The national debt has passed another historical milestone, topping $14.3 trillion for the first time ever, according to data released by the U.S. Treasury late Monday afternoon.
When the Treasury opened for business on Friday, April 15, according to the Treasury’s Bureau of the Public Debt, the national debt stood at $14.27 trillion ($14,270,792,119,184.89). By the close of business Friday, the debt had climbed to $14.31 trillion ($14,305,336,580,992.11), an increase of $34.54 billion ($34,544,461,807.22).
Friday’s $34.54-billion jump in the national debt almost equaled the $38.5 billion the Republican House leadership said would be cut from spending for the remainder of this fiscal year by the continuing resolution that the Congress passed on Thursday and President Obama signed Friday.
The federal government is now perilously close to hitting its legal limit on debt.
At the close of business Friday, according to the Daily Treasury Statement published Monday afternoon, the Treasury only had legal authority to borrow another $40.821 billion.
(The legal limit on the debt that Congress and President Barack Obama set last February is actually a bit lower–at $14.2940 trillion–than the total federal debt of $14.3053 trillion that the Treasury reported for the close of business Friday. The total debt reported by the Treasury can exceed the curent legal debt limit of $14.2940 trillion because a small portion of the total federal debt is exempted from the limit. As of the close of business Friday, the portion of the debt that is subject to the legal limit had reached $14.253179 trillion.)
Gold futures rose to a record $1,500.50 an ounce as U.S. debt concerns weighed on the dollar, boosting demand for the precious metal as an alternative investment. Silver surged to a 1980 high.
The greenback dropped against the euro on speculation that the European Central Bank will continue to raise borrowing costs as some nations struggle to contain sovereign debt. Standard & Poor’s yesterday revised its long-term outlook on U.S. debt to negative from stable. Gold has climbed 32 percent in the past year, and silver prices have more than doubled.
“The U.S. credit rating will undoubtedly be lowered in the next few years,” said Michael Pento, a senior economist at Euro Pacific Capital in New York. “This will mean much higher borrowing costs and a much lower currency. International investors have been using gold and silver as an alternative currency and an alternative to the dollar, and this will only exacerbate and accelerate that process.”
Gold futures for June delivery rose $2.20, or 0.1 percent, to settle at $1,495.10 at 1:38 p.m. on the Comex in New York. Earlier, the price climbed as much as 0.5 percent to the record.
Gold for immediately delivery rose $1.97 to $1,497.27 at 3:49 p.m. New York time. Earlier, the price gained as much as 0.3 percent to an all-time high of $1,499.32.
Silver climbed as much as 2.8 percent to $44.175 in after- hours trading. The most-active contract settled up 95.7 cents, or 2.2 percent, to close at $43.913 an ounce.
“Silver is like gold on steroids,” said Jon Nadler, an analyst at Kitco Inc. in Montreal.
Euro Pacific’s Pento, who correctly predicted gold’s rally in the past three years, said the metal will reach $1,600 in 2011. The commodity has gained every year since 2001 on increased investment demand for raw materials.
“The bullish trend becomes pronounced as more and more people get out of the dollar to buy hard assets,” said Lim Chae Myung, a Seoul-based trader with Hyundai Futures Co.
The Treasury Department projected that the government may reach the $14.3 trillion debt-ceiling limit as soon as mid-May and run out of options for avoiding default by early July.
The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and has pledged to buy $600 billion in Treasuries through June to stimulate growth.
The ECB this month raised its main rate to 1.25 percent from a record 1 percent to stem inflation.
The Fed probably won’t risk damping economic growth by raising borrowing costs rapidly, Pento said.
S&P changed its long-term rating, citing “material risk” that policy makers won’t reach an accord on “medium- and long- term budgetary challenges.”
“There certainly has always been that lingering concern over U.S. debt and the S&P people are finally identifying the threat,” said Stephen Platt, an analyst at Archer Financial in Chicago. “The world is awash in liquidity. Gold’s slow, grinding action upward shows the deterioration in the dollar, excess liquidity and deficit problems are still in force.”