National Debt: US Economy Priced in Gold – Cause For Alarm
We all know a debt bucket in a US economy is horrible and unsustainable. The US supervision runs deficits of approximately $1 Trillion per year, even with seductiveness rates during chronological lows. Current executive inhabitant debt exceeds $19 trillion, of that $13.9 trillion is open debt. Unfunded liabilities are most larger. Even a 7% normal seductiveness rate would need scarcely $1 trillion per year for seductiveness usually debt service, thereby augmenting inhabitant debt even some-more rapidly.
National debt has augmenting exponentially for a past 50 years. Expect a exponential boost to continue and accelerate, even with historically low seductiveness rates.
What if we labelled inhabitant debt in “real money” – tangible bullion instead of a digital and paper things that can be combined during a humour of a executive banker?
I used a annual normal of bullion prices and heavily smoothed them with a 7 year relocating average. Then we divided a inhabitant debt by a heavily smoothed bullion prices.
The 35-year graph shows on normal a inhabitant debt has augmenting rapidly, even when labelled in gold. This should be means for alarm – debt is augmenting distant too rapidly…and bullion is underpriced.
The stream inhabitant debt is equal to about 100 times a sum value, during stream bullion prices, of a bullion “officially” stored in Fort Knox. This should be means for alarm.
What about send payments per a St. Louis Fed (FRED)? According to FRED a sum transfers for amicable advantages in 2015 was about $1.959 trillion – or 10 times a value of a bullion strictly stored in Fort Knox. A 35-year graph is shown below. Of march send payments have usually augmenting from $251 billion in 1981 to $1,959 billion in 2015, yet even labelled in bullion a send payments have increased.
What about non-financial corporate debt? According to FRED that debt was $474 billion in 1981 and about $5.4 trillion in 2015. If a US economy falls into a recession, what commission of that debt will default? All of that debt is someone else’s asset. Therefore, those resources disappear if that debt defaults. Ergo, means for alarm…
What about salary as distributed by Social Security? The executive normal inhabitant salary in 1981 was $13,773 — and in 2014 it was $46,481. we divided that executive normal salary by a heavily smoothed cost of bullion and constructed a following chart. National debt, corporate debt and send payments are augmenting some-more fast than normal wages. Ergo, means for alarm….
- Official inhabitant debt is large and accelerating aloft even yet rates of seductiveness paid to use that debt are historically low. The Fed will have problem lifting rates.
- Non-Financial Corporate debt now exceeds $5 trillion, interjection to low seductiveness rates, QE, and batch buy-backs saved around debt. The subsequent retrogression will be cryptic for debt amends to those who trust those debts are assets.
- Wages are augmenting solemnly compared to debt. Sustaining a customary of vital around debt(individuals and governments) only works for a singular time. “Those trends are entrance to an end…”
- The executive society of bullion presumably stored in Fort Knox is 147.3 million ounces, value during stream prices reduction than $200 billion, a little fragment of executive inhabitant debt – debt that can’t be paid will be defaulted, possibly around acceleration or repudiation. The cost of bullion will arise almost as tellurian banking values fall.
- Defaulting debt will be mortal to a value of a dollar as good as all other paper and digital currencies. Gold has no counter-party risk…and will therefore advantage accordingly.
From Bill Gross:
“For over 40 years, item earnings and alpha era from penthouse investment managers have been materially aided by declines in seductiveness rates, trade globalization, and an huge enlargement of credit – that is debt. Those trends are entrance to an end…”
From Charles Hugh Smith:
“Leaders face a no-win dilemma: any change of march will pile-up a system, yet progressing a stream march will also pile-up a system.”
Repeat: “Those trends are entrance to an end…”
Gold and china come to mind…
Courtesy: Gary Christenson – The Deviant Investor
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Corporate Debt , Debt Defaults , Fort Knox , Gold and Silver , Gold Prices , Low Interest Rates , National Debt , National Wage , Price of Gold , Recession , Social Security , US Economy