March 16, 2017
Death: It comes to all of us, including empires, paper currencies and countries.
Debt: The world is drowning in debt – $150 to $200
trillion. The U.S. government is sinking into a black hole of debt – $20
trillion official and another $100 – $200 trillion in unfunded
obligations. Total U.S. debt securities exceed $40 trillion according to
the St. Louis Federal Reserve.
Devaluation: Given unpayable debt and unwillingness to face the insanity, the remaining option is devaluation.
Taxes: Governments need more revenue. It will come from taxes and “printing.” Both are poor choices.
Since 1913 debt has been a necessity for bankers, governments, and
businesses. More debt = more currency in circulation = higher prices,
including gold and silver.
There is practically no chance that debt will stabilize or decrease.
Consider total U. S. government debt in 1972 (roughly $400 billion)
versus today (roughly $20,000 billion = $20 trillion).
Total U.S. debt securities in 1972 were roughly $850 billion versus
today, roughly $41,000 billion = $41 trillion. The following graph uses a
log scale and shows that total debt securities have increased about 9%
per year since 1971. The gold scale matches the debt scale.
Gold prices have increased along with debt and currency in
circulation. Gold bubbled higher in the stagflationary 1970s and then
languished in the “great age of paper” from 1982 – 2000. Gold will
probably catch up with debt as central bankers rapidly “print”
currencies, which will cause accelerating devaluations in the next
Are higher gold prices guaranteed?
- Of course not. But higher gold prices, given the monetary systems in
place, along with overwhelming debt and inevitable devaluations, must
rally much higher.
- The debt junkies of the world, including governments, central
bankers, congress, leaders, corporations and individuals will increase
debt to continue buying votes, boosting stock prices, and living in
excess of revenues. Yes, debt will increase as it has for over a
- How many politicians or Presidents have asked congress to cut spending and balance the budget? Debt will increase.
- If total debt were to be reduced the current system would spiral
downward into a horrible depression. What politician or central banker
desires that outcome?
Bet on increasing debt and devaluation.
- Debt will increase, currencies will devalue, and central banks will
“print” to keep the financial systems moving and markets rising, if they
can. How much more debt can the system accommodate?
- Bonds have rolled over from a 35 year bull market. Is a ten year bear market from 2016 – 2026 unlikely?
- Mortgage interest rates are rising, which are restricting real
estate sales and refinancing. Commercial property is weak. How many
newly printed “out of thin air” dollars will be needed to inflate that
- Regardless of the “official” statistics the U.S. economy acts weak
and poised to fall further. An excess of debt, rising interest rates,
and the “blowback” from decades of bad policy, poor decisions, wars, and
excessive expenditures are a drag on growth. Expect a slowing economy,
higher consumer price inflation, recession or depression.
- Rising interest rates, higher consumer price inflation, slowing
economy, bond bear market and stocks rolling over indicate —
STAGFLATION. Welcome to a return of the 1970s, but probably worse.
- Gold rose from about $40 to over $800 in the 1970s and into January
of 1980. Silver rose from under $2 to over $50 during the same time.
They will bubble higher again, sooner rather than later.
But you might say, “I doubt it.” You could be right, but consider:
- The “smart money” bet on Hillary. How did that work out?
- Brexit? That wasn’t supposed to occur either.
- Who wins the ongoing currency wars as all countries devalue? Answer – nobody.
- Will the Euro survive another “exit?”
- Gold has been real money for thousands of years. How long have
unbacked debt-based fiat currencies survived before their governments
and central banks devalued them to worthlessness? Answer: usually only
- When the Euro and dollar have become distant memories, gold will still be valuable.
- Fiat currencies have crashed before while gold and silver have
retained their value, rising in nominal currencies to unbelievable price
heights. Fading currencies and rising metals are likely in our near
||GE Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 - 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites.
The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.