Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

You Can’t Eat Gold or a Debt Sandwich

Commodities / Gold and Silver 2015 Nov 24, 2015 - 06:15 PM GMT

By: DeviantInvestor

Commodities

In one hand we hold gold, which is eternal, beautiful, and valuable everywhere.

In the other hand we are stuck with a debt sandwich.  That sandwich is a massive slab of debt wedged between an impressive military war machine that spends money like water flowing over Niagara, and a huge welfare system that spends money even more rapidly.  Included in the welfare system are Social Security pensions, Disability Income, Medicare, Medicaid, SNAP (food stamps), many more programs, and the salaries, bureaucracy and pensions to support them.


You can’t eat gold, but you can’t eat a debt sandwich either.  If you choose gold, it is recognized and valued globally and can easily be exchanged for goods and services.  That is why India has, according to estimates, something like 20,000 tons of gold.  That is why China has, according to estimates, something like 15,000 tons of gold.  That is why Fort Knox, according to 60 year old audits, still claims to hold about 4,500 tons of gold.

If you choose the debt sandwich you accept the consequences of debt:

  • Debt has counter party risk. The debt is only as good as the debtor.
  • Debt has currency risk. Who wants to be repaid with one billion Zimbabwe dollars?
  • Debt is good only as long as the “full faith and credit” narrative is believable. Creditors of sovereign nations will eventually realize that they can be repaid ONLY if the sovereign nation debtor can borrow even more.  THIS IS A FLAWED SYSTEM.  Is forever spending more than your personal income, adding to credit card debt balances, and then begging for an increase in credit limit a viable way to run personal finances?  Of course not, but it has worked well (so far) for some sovereign governments.  A counter example is Argentina, which has inflated and devalued their currency so much that Argentina has dropped ten zeros off their currency in the past 40 years.  A variation of this inflation and devaluation story will probably come to Europe, Japan, and the US.

Question:  If perpetual borrowing is so bad, why is it still working?

Answer:  If you jump off the Empire State Building, and pass the 40th floor on the way down, it might seem like an enjoyable leap with no consequences.  Just because you and your currency have not yet hit the concrete does not mean either of you will survive much longer.

Question:  If debt based fiat currencies are so bad, why do we use them?

Answer:  We use them because they are dishonest money that is easy for bankers and politicians to manipulate, steal, and counterfeit. They are also convenient.

Delusion:  There is not enough gold in the world to allow global economic systems to return to a gold standard.  Hence we must continue printing fraudulent paper and digital dollars.

Reality:  Poppycock!  A higher gold price is necessary only because global central banks have “printed” so much “funny money” (global debt exceeds $200 Trillion) that when the reckoning and revaluation occurs, either gold must be priced much higher or “funny money” must be valued much lower.

Question:  Will most nations return to fiscal and monetary sanity anytime soon?

Answer:  Sadly, no.

Question:  Will most nations return to a gold standard anytime soon?

Answer:  Sadly, no.

Question:  Must all fraudulent Ponzi systems eventually crash or reset?

Answer:  Yes.

Question:  When will the crash occur?

Answer:  Maybe the crash is ongoing.  The crash does not necessarily have to occur in a short time period, although that seems likely.  Gold cost $20.67 per ounce 100 years ago.  Today it costs, due to dollar devaluation, about $1,100 per ounce.  That looks like a 98% crash, but it can become rapidly worse.

Question:  What about black swans?

Answer:  Yes, of course.  A debt based fiat currency system is inherently unstable and will eventually correct or crash.  Any number of events could push the instability into a crisis.  All the King’s horses, all the King’s men, and all the PhD economists may not be able to put a fiat currency system back together again.

From Ron Paul:

“Allowing a secretive central bank to control monetary policy has resulted in an ever-expanding government, growing income inequality, a series of ever-worsening economic crises, and a steady erosion of the dollar’s purchasing power.  Unless the system is changed, America, and the world, will soon experience a major economic crisis.  It is time to finally audit, then end, the Fed.”

From An Interview with Hugo Salinas Price:

“Everyone knows the US government is drowning in debt…”

“I just do NOT see any way out…”

“Gold in 2020:  $10,000 to $50,000/oz …”

“Silver in 2020:  $600 – $3,000/oz …”

Paper Dies!  Gold Thrives!

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2015 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in