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People riding a runaway train can party and remain oblivious to the fact that the train is about to crash into a huge obstacle. Our runaway financial train is about to destroy the status quo as it crashes into the obstacle of mathematical consequences – the inevitable financial train wreck. “If something cannot go on forever, it will stop.” [Let me explain.] Words: 974
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), may have edited the article below to some degree for length and clarity – see Editor’s Note at the bottom of the page for details. This paragraph must be included in any article re-posting to avoid copyright infringement.
Christenson goes on to say, in part:
Let’s begin with a few facts and assumptions and follow the logic:
- Gold has been a store of wealth for more than 3,000 years. Silver has been used as money in most countries of the world. Both are still valuable.
- All unbacked paper money eventually reverts to its intrinsic value of zero. Throughout history, there have been no exceptions to this statement. The world’s current experiment with unbacked paper money is only 41 years old and looking rather strained.
- A person, business, or government cannot increase their indebtedness forever by spending in excess of revenues. This seems self-evident. Eventually, the person, business, or government will become unable to find anyone willing to lend under those circumstances. “Deficits don’t matter” is nonsense.
- “If something cannot go on forever, it will stop.” This is Stein’s Law and seems obvious, but we often act as if we don’t believe it.
- Politicians and governments will do everything possible to retain current power, even if it is destructive in the long term.
My belief is that most people will agree with these simple and straight-forward statements.
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Survival Investing with Gold & Silver
by GE Christenson – aka Deviant Investor
The current debt of the U.S. government exceeds $16 Trillion and will increase at current growth rates to about $25 Trillion in another four years. Interest rates on the national debt are historically low because the Federal Reserve continues to “print money” and then makes huge purchases of government bonds. Assume a modest 5% interest rate on $25 Trillion of national debt in 2016.
- Do you believe that our economy can generate $1.25 Trillion in annual taxes just to pay the interest on the debt?
- How about funding a 6% interest rate on $35 – $45 Trillion in national debt by the year 2020?
The interest payments would be about $2.4 Trillion – approximately the entire revenue for the government in 2012. “If something cannot go on forever, it will stop.”
Incidentally, the present value of unfunded obligations of the U.S. government for Social Security, Medicare, Medicaid, military pensions, and other commitments is $100 Trillion to $220 Trillion depending upon who is counting. It does not matter which calculation is correct since it is impossible for the US government to fund and pay either present value estimate.
Our politicians will probably address the budgetary problem, as created by them, by taking the easiest way out, by angering the least number of voters, stalling, blaming others, appointing committees, and by concealing the problems and consequences as best they can. Possibilities include:
- printing $Trillions and blaming the resulting inflation on a convenient scapegoat,
- defaulting on all debt owed to foreigners,
- means-testing Social Security, Medicare, and other programs,
- forcing pension funds and IRA’s to buy T-Bonds,
- higher taxes,
- higher inflation, and
- reduced military spending.
Many more creative suggestions will be set forth, but they probably will not include balanced budgets, fiscal sanity, or debt repudiation.
If paper money eventually declines in value to nearly zero, the national debt is never repaid, government…continues to borrow and spend in excess of revenues, and this process… is extended for only a few more years, should we assume that:
- the dollar decline in value against all commodities will cause all food, energy, metals, and practically everything you need for survival to substantially increase in price?
- government guarantees, programs, and promises will be changed, reduced, eliminated, or devalued? How much good is receiving Social Security income if your monthly benefit purchases only seven loaves of bread, a few fishes, and a tank of gasoline?
- taxes will increase and our standard of living will decrease?
- most paper wealth in the form of debt instruments, T-Bonds, T-Notes, state government bonds, and corporate debt will substantially decline in value and purchasing power?
- gold re-enters the global monetary system in some form, not because politicians and central bankers want it, but because they are forced to include gold in order to create a credible monetary system that will inspire confidence in the new currency?
The above begs the question, how do you prepare?
Perhaps we should cash out all paper investments, buy gold, and hunker down on rural farmland but this will not work for most people…[because, while they] know much is wrong in our economy, they are not ready to abandon their current lifestyle. The problem is that by the time it becomes clear that economic disaster is upon us, it will be too late for most people to protect themselves. A partial solution is simply to buy physical gold and silver – NOW!
When will this economic collision/collapse/crash/disaster occur in the United States? Jim Sinclair, one of the premier financial intellects of our time, thinks we may have until perhaps 2015 – 2017 before the collision. He recommends having physical gold bullion in your possession or perhaps stored in a secure private storage facility. I think silver coins and bullion stored in a secure and private facility are also a wise investment.
Conclusion
We don’t know when the crash will occur but it makes far better sense to prepare now, even if early, than to wait and hope. If all of these potential disasters miraculously disappear and our financial world continues as it has, preparation will be, at worst, inexpensive insurance. “Buy that insurance” while you still can.
Are you prepared? Do you have enough financial insurance – physical gold and silver?
*http://www.deviantinvestor.com/1734/gold-paper-and-a-train-wreck/
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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Over the past few years, policy leaders worldwide have grown accustomed to kicking the can down the road with each step in this ongoing financial crisis making incremental moves rather than cultivating viable long term solutions. More recent attempts seem to have evolved into simply just trying to kick the can out of the driveway. Now we fear there may not be enough firepower left to simply kick the can over. [Having done so, we are left between the proverbial rock and a hard place.] If lawmakers do nothing, by all accounts we are likely to see a recession. Should lawmakers extend the Bush-era tax cuts, you make no progress towards long term deficit reduction, potentially raising the risk and magnitude of a future financial crisis. [Let me discuss this predicament further and how best to invest in such precarious times.] Words: 1602
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What is next making holding Gold and or silver illegal?
No wonder the Wealthy now keep their money off shore…