The U.S. federal debt hit a sad milestone on November 22 that I hoped we’d never see…
We are now all indebted to the tune of $19.9 trillion.
Without a doubt, by the time President-elect Trump is sworn into office, we will face a national debt of $20 trillion. This is a figure double that of when Obama became president in 2008.
The Congressional Budget Office (CBO) has even more sobering news: the rising costs of Medicare and Medicaid could push the national debt to an eye-popping $45 trillion in 20 years. This is before you account for the impact of any new Trump spending or tax breaks.
In fact, President-elect Trump’s ambitious spending plans combined with his proposed tax cuts are expected to add roughly $9 trillion more to the national debt in the coming decade.
This is why bargain-hunters are currently taking a new look at gold and silver.
A BURDEN WE ALL SHARE
This crushing debt is ours to share together as U.S. taxpayers, regardless of whether we benefited from the reckless, unchecked government spending it represents. Imagine what will our children have to say about this.
What does this mean for gold, you might ask?
Think about what this terrible debt means to the future of the U.S. dollar, especially at a time when China has been pushing hard to become the new reserve currency of choice for the world’s bankers.
I seriously doubt there is long term justification for the recent Trump rally we’ve seen in the dollar. A sensible person can see how gold could be positioned to benefit if the dollar falls from here.
If we can’t turn this debt around, and do it soon, the dollar is surely doomed as a currency.
Here the cold facts about our national debt:
- If you divide our $19.9 trillion federal debt by population, everyone living in the U.S. owes more than $60,000 each
- The CBO projects national debt as a percentage of GDP will rise to 122 percent of GDP by 2040
- As of 2016, 7 percent of the federal budget was spent on interest. By 2040, net interest is projected to rise to 18 percent of the federal budget
The numbers are so large, the human brain literally cannot conceive of it. If you brought $20 trillion in one-dollar bills to the bank and handed the teller a dollar every second, it would take 640,000 years to completely fork over the cash.
The national debt is here to stay and there are no signs that Trump or Congress has the courage or political will to tackle one of the greatest financial challenges of our time. In a world where central banks have been printing money for years with little to show for it except negative interest rates, having your portfolio invested only in paper assets is a leap of faith that can no longer be justified.
Ron Paul calls gold “insurance,” reaffirming the age-old appeal of owning a safe haven asset that is not tied to politicians, central bankers or the growing national debt.
When inflation returns, gold could benefit. If economic growth stalls and rates are cut, gold could perform well. If the dollar collapses, gold could benefit.
GOLD DESERVES A PLACE IN YOUR PORTFOLIO
Editor and publisher Mark Faber sees contrarian opportunities in gold and emerging markets. Faber cautions investors to stay away from assets that have rallied recently, particularly the U.S. dollar. Gold is a key asset to own in times of economic turbulence and Faber thinks gold is now attractive at these lower price levels. According to Faber, the U.S. market is not as strong as the indices would suggest. He notes that only a small number of stocks have led the rally and the U.S. is showing only low-quality economic growth.
If Trump follows through on his protectionist policies, HSBC predicts a dire trade war could erupt that will destabilize global markets and cause gold prices to rise. After Brexit and Italy’s rejection of modern reforms, decades-old military and political alliances are unraveling and more investors will seek out the safety of gold. HSBC believes that ongoing uncertainty will propel gold prices higher over time.
ETF Securities head of research and investment strategy James Butterfill remains bullish on gold and maintains a target price of $1,440 for mid-June 2017. Butterfill notes that aside from the considerable risks of a Trump presidency, 70% of Europe by GDP has elections in 2017 just as populism and nativism are surging in the polls. Butterfill discounts the Fed rate increase this month and thinks gold is a great buying opportunity. To him, the upcoming Fed rate increase reflects the re-emergence of inflation. According to Butterfill, the national debt is currently about 75% of GDP, a ratio not seen since 1950.
Butterfill thinks that 2017 will be a very good year for gold.
GOLD: THE ASSET YOU CAN HOLD IN YOUR HAND
Gold is considered a secure and portable safe-haven asset in an age of uncertainty and political and social upheaval.