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How will the “sequester” affect the price of gold and silver?

So you’ve likely heard it all over the news…Sequestering just became a reality. But what does it mean? And how will it affect you? Will it affect the price of your gold and silver jewelry?

The so-called “sequester” was the result of the can being kicked down the road (once again) by the U.S. Congress and President Obama during the deliberations to resolve the debt ceiling “crisis” of the summer of 2011. Part of the crisis resolution involved creating across-the-board budget cuts to military and domestic programs.

The hope was that these potential cuts would serve as incentives for both parties and their leaders to reach agreement by March 2013. In fact, the sequester itself was invented by the Obama White House and agreed to by both Harry Reid (D) Head of the Senate and John Boehner (R) Speaker of the House.

Since then no progress has been made to craft a sensible budget that reduces the deficit as well as the nation’s crippling debt level ($16.5 trillion & climbing). But the sequester “solution” is not ideal. The big problem is that these huge, poorly planned budget cuts will likely result in an already very weak economy getting even worse.

Which, by the way, would lead to the very definition of a recession (two quarters in a row of negative national growth). Not only that, but if the sequester isn’t lifted almost immediately, the loss of jobs from the military-industrial complex alone would result in a projected increase in unemployment rate from 7.8% to 9.8%.

Not only would this be devastating to the economy, but it would lead to massive private sector unemployment and provide even more incentive for the credit rating agencies to downgrade the U.S. credit score.

So what does that mean?

The credit rating agencies have been watching the U.S. debt and plans for the economic future. They’re just waiting to downgrade us. They’ve also been waiting to see how the sequester discussion gets resolved. If it looks like our government is actually dysfunctional and can’t come to any compromises, the credit rating agencies are ready to downgrade the U.S., which would devalue the US dollar even more than it already is.

But how does that affect the price of gold and silver?

With a weaker dollar, both gold and silver prices would rise dramatically, just as they did in August 2011 when our debt was downgraded by S&P.

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