Ten years ago markets corrected violently because of debt. Margin accounts were bulging with irrational exuberance to the point where even a small shift in sentiment could cause an avalanche of selling. That's exactly what happened. The rise in stocks could not be sustained when dependent on the unlimited availability of credit. Savvy investors began to see the light and gold demand started to climb as did gold prices.
Five years ago the real estate market began to inflate. Once again credit flowed freely as there seemed to be a limitless supply. Markets were also re-inflated as phantom equity in both stocks and real estate was borrowed to buy more and more of each. Once again the inevitable - investing borrowed money could not sustain infinite growth. A gold coin, however, continued to rise in price.
Two years ago the collapse in housing, stocks, jobs and the economy in general, was blamed on what? You got it - A Credit Crisis! Too much debt. You didn't have to be a genius, like the ones you see on TV, to know that all of the trouble in our economy was caused by debt. And gold prices started to rise faster.
Six months ago, predictions regarding the long-term outlook for gold prices were everywhere, ranging from $2000 by prominent banks, to $5000 an ounce and beyond. A broad consensus of those analysts attributed such a positive outlook, at least in part, to rising debt.
Today, reports abound saying we are in recovery. And to what do we attribute this miracle? You got it! RISING DEBT! Our Federal Government is bursting with more than $14 trillion of debt as it attempts to borrow our way out of a credit crisis.
It's financial insanity to acknowledge debt burst the dotcom bubble, the tech bubble, the real estate bubble, the market bubble, then believe more debt can re-inflate all of those bubbles and the economy. It's like trying to bail out a ship from the bottom of the ocean.
It's not a question of if it's a question of, when does the can get kicked over the edge of a cliff. Make no mistake, debt is a serious problem in this country, not just abroad. Today, some 100 cities in the U.S. will not be able to honour their debt obligations. While cities verge on the brink of default, multiple states are also following suit. Even now, policy makers are working hard behind the scenes to come up with a way to let states declare bankruptcy.
Default at some levels seems inevitable. The only way it may be avoided is to inflate the money supply to such high levels that inflation will pay debt. You may have to pay $7 for a gallon of gas and $10 for a dozen eggs, but we will be able to pay our debt. As I have said many times, now is the time to see what almost surely lies ahead and take action. While analysts have jumped off the ship at the bottom of the ocean to say we are in recovery, in the end it is only you who can take action to protect what you have worked so hard to save.
For ten years gold has been rising, in large part, due to the unstoppable accumulation of debt. It has protected savings and retirement accounts and provided growth at a time when it seemed nothing else could. With gold prices now off their highs only you can decide whether or not you believe debt can bail out our economy. Only you can decide to buy or not to buy - Gold!