Lear Capital: Is the U.S. on Its Debt Bed? Is Gold the Cure?

By @ibtimes on

DaveMind boggling isn't it?  One minute we're printing money for clunkers and new windows to replace the ones we just threw money out of.  The next minute we're contemplating penny-ante ways to cut spending, balance the budget and reduce debt.

Cutting defense spending is on the table as well as a proposed pay freeze for civilian government workers.  One Texas Republican, Kevin Brady says cut the federal workforce by 10 percent.  Even cuts to Social Security benefits and Medicare have been brought to the table, but good luck on that one. 

Currently, of every dollar the U.S. spends to pay its bills, 40 cents is borrowed.  As we continue to borrow money to pay debt, the snake has begun to eat its own tail.  Eventually, it will bite off its own head.    I mean really!  Why cook up ways and reasons to borrow money and increase debt, if all it means is we have to sit down and figure out new ways to get rid of it?

Be that as it may, that is what we are doing.  Couched in those terms, it seems rather hopeless.  Not so.  I think we all have to resign ourselves to the fact that really high inflation is coming and there is no way to stop it.  If debt gets so great we have to default, the dollar crashes as investors lose faith in dollar assets.  If we keep printing money for stimulus and to pay debt, the dollar crashes anyway.  The speed at which it does is perhaps the only real mystery.

Lose lose! Win win! You decide which side you want to be on.  To win, you need to figure out how to invest in a manner that allows you to use some financial judo.  Take advantage of inflation by making investments into things that usually do better as inflation rises.

Commodities fall into that category.  Historically, real estate was also thrown into that mix.  The problem with real estate at the moment, though, is the number of looming foreclosures.  Prices in real estate will not bottom until the majority of these issues are settled.  It is estimated that more than 10 million homes are still at risk of being foreclosed upon.  Meanwhile, downward price pressure still exists.

Then, of course, there are precious metals.  Currently, we're seeing some downward pressure on gold prices and other metals.  I attribute that to investor confusion over what to be uncertain about.  The financial media is trying to cram recovery down our throats, while Congressmen are warning us debt is driving us to the verge of default and riots in the streets.  See Congressman Paul Ryan's warning in this article.

While the whole world is scrambling to protect itself from default by owning more and more gold - silver too - far be it from any of our officials to say maybe you should own a gold coin.  China flat out tells their citizens to get some gold, Russia has been buying by the gruzovik load, Greeks have paid as much as $1700 an ounce for it and then we get gold vending machines.  Globally, gold demand is skyrocketing.  

Our elected officials tell us the opposite and do everything they can to promote it.  Spend Spend Spend!  And, if you don't have the money to spend we'll print it for you.  Wake up and smell the dead fish.  Accept inflation, even embrace it.  Let the economy recover with printed money but don't get caught on the wrong side of the trade.  You have to diversify - you have to prepare.  Gold can't cure the debt problem but it can make you immune to the ravages of inflation. 

  

 

 

Join the Discussion