Debt & Deficits

Debt isn’t without consequences - and the consequences will be severe when the chickens come home to roost.

A BIS study warns that budgets of most advanced economies, excluding interest payments, "would need 20 consecutive years of surpluses exceeding 2 per cent of gross domestic product – starting now – just to bring the debt-to-GDP ratio back to its pre-crisis level".

In basic terms, in the bigger picture, the United States is going broke. We’re heading for a sovereign debt crisis. I don’t say that for effect. I’m not looking to scare people or to make a splash. That’s just an honest assessment based on the numbers.

A vicious upward debt spiral is gaining momentum. The budgets of most advanced economies, excluding interest payments, need 20 consecutive years of surpluses exceeding 2% of gross domestic product – starting now – just to bring the debt-to-GDP ratio back to its pre-crisis level.

The illusion that the global economy could effortlessly add trillions in debt to fund living large forever was based on a brief historical anomaly of zero interest rates enabled by low inflation that was never sustainable and the eventual consequences on supply, demand, risk and price discovery are finally visible.

Although one often hear assertions about how federal spending or federal taxes have been climbing out of control for years or decades, the actual spending and taxing totals for the federal government have been remarkably stable for a half-century

The following chart indicates...[the extent, in percentage terms, to which various] entities have loaned money to the U.S. government...[and, as such,] their share of the U.S. national debt as of 30 September 2021.

Debt has risen on all fronts to unprecedented levels...and now accounts for $52 trillion in the USA of which American household indebtedness amounted to an average of $118,000 per household in 2020. That’s a big bill to pay. Here’s how the various forms of U.S. household debt compare...

Explosive fires always end in everything burning down or imploding eventually and this is just what is going to happen in the next few years. A massive forest fire is not just totally inevitable but is also an absolute necessity.

With deficits growing wider each year, we believe there is a very high likelihood that the price of gold will rise in the next few years.