Lear Capital: How to Dodge Debt Crisis With Gold

By @ibtimes on

DaveWhatever happens and however the story is spun, we are about to add more debt to an already unsustainable debt level.  Let's look back to pre-crisis deficits.  Before the credit crisis struck in 2008, government was running at an annual budget deficit of about $400 billion dollars.  Since then, that number has ballooned as high as $1.65 trillion this year with another $1.1 trillion already penciled in for 2012.  That would give us four consecutive years of trillion dollar plus deficits.

Now, they talk about cutting $400 billion a year from the budget over 10 years for a total of $4 trillion in deficit cuts.  (Maybe someone should have thought of some of this before $500 billion was pledged for a new health care system.  But I digress.)  My question is, Cut from what?  Budget projections and the resultant deficits I've seen are based on estimates of rising tax revenues.  But, in case no one has figured it out yet, we need more jobs to get more revenue.  That ain't happenin' - at least not yet.

Then consider this.  Even as higher tax revenues are projected, the proposed cuts are still not enough to balance the budget.  Hence, more printed money, more deficits, higher debt, a weaker dollar, rising inflation - - Long Sigh -- and still a day of reckoning to look forward to.  The day we kick the can down the road and over a cliff.

If I were Einstein, I couldn't come up with a better formula for rising gold prices ahead.  Maybe this explains why central banks of the world have, for the first time in 20 years, become net buyers of gold.  Think about it!  The same people who print money to keep the world economy alive, are buying gold. 

Here's what the situation boils down to.  An infinite supply of currency is chasing a very finite supply of gold.  A supply that is shrinking rapidly as it is being bought up with printed money.  This is how Central Banks of the world, are dodging their own debt crisis.  Surely, if we could all print our own money we could survive the day when the can gets kicked over a cliff.  Since we can't, our only option then is to convert some of the same money they print so freely to real money like gold and silver.  -  The End!  

 

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