The Accumulated Federal Debt is a can that is kicked down the road until the kicker’s turn is over and the can is passed to someone else to kick. A political football perhaps that can be acknowledged but not dealt with as the process could cost votes. At least that is the modern version of the game. President Andrew Jackson did not get the memo. The War of 1812 doubled the Federal Debt from $45.2 Million to $119.2 Million by September 1815. War bonds were issued to finance part of the debt, but not until Jackson became President in 1829 with a promise to erase the “national curse” did the problem go away. With what would be described as Fiscally Conservative measures today, the debt was reduced to zero and a surplus was realized which was divided among indebted states. That was the last time the Federal Mountain of debt was addressed, 188 years ago.
The speed of growth of these loans is staggering. It took a few generations from 1836 until 1981 for the pile to grow to $1 Trillion. It was only 15 more years to get to $5 Trillion. A shorter 12 years to get to $10 Trillion in 2008. Then President Obama and his super majority of Government doubled that to $20 Trillion in just 8 years. The panic over the Covid-19 Pandemic and the government response helped to take the total to its current historical peak of $34 Trillion and it is going parabolic. It increased $1 Trillion from May 2023 to June 2023, yes, no typo, 1 month. Since May 2023 we have added $2.5 Trillion Dollars to the debt that will be paid by our Grandchildren. That is a $5 Trillion per year pace. That will put us at $100 Trillion in Federal Debt by the year 2037, just over 13 years.
Politicians call it “a non-issue”. Economists call it “unsustainable”. We are very quickly approaching $1 Trillion per year in interest on the debt. Andrew Jackson sold land and cut spending to accomplish his goal. With the largest portion of our annual budget now shifted from military spending and infrastructure to entitlements, any attempt to affect the annual deficit is perceived to be political suicide.
Now is a good time to talk about the real number as it pertains to the countdown of the National Debt Clock. Debt vs. Gross Domestic Product. When the European Union was setting up requirements for membership, it was determined that a Debt to GDP ratio of less than 60% was ideal. Our ratio has not been ideal by those standards since 2007. Today it is 120%. When the National Debt reaches $100 Trillion, the GDP will have to be $60 Billion for our ratio to be “ideal”. Our GDP for 2023 was $26 Billion. The Gross Domestic Product that took nearly 250 years to reach $26 Billion per year, has to double in the next 13 years to keep up with spending and borrowing and more spending and more borrowing.
Are we perhaps still paying for the Great Recession which was brought about by free money loaned to too many people that were never going to be able to pay it back? That same debacle was “solved” by handing out free money for a decade while attaching a jet turbine to the Treasury department’s printing presses. How can anyone be shocked by the inflation that we are experiencing today? How can anyone be shocked that our enemies have recognized the economic weakness that we have grown into while not televising it to our citizens.
When the BRICS firm up their alliances and increase the number of De-dollarization deals the global landscape is going to change like it has never changed before. Bypassing the Greenback for local currencies or a Gold backed BRIC instrument is what is happening right now. What is going to happen to all those USDollars that are sitting in foreign reserve accounts of our enemies. You don’t have to look far. It is happening right now. More Gold has been bought by Central Banks in the last 24 months than any 24-month period since 1950. Gold is priced in USDollars around the world. It is extremely easy to exchange USDollars for Gold. Simply move the units of USDollars into equal units of Gold.
USDollar reserves fall, Gold reserves rise. It is happening right now. When the large number of USDollars in foreign the Foreign Reserve Funds are spent buying real money, Gold, those Greenbacks will repatriate back to the United States Mainland. How much, you ask, will come home? There are $12 Trillion Dollars in foreign reserve funds around the world. The current inflation is largely blamed on the money printing during the Covid vacation Americans took. That was only about $2.5 Trillion. Not only do our enemies and the growing number of emerging countries no longer need USDollar reserves, but it is also not prudent for them to ignore the parallel economy which is the BRICS Alliance. There are about to be two parallel economies running side by side. The West, for the moment lead by the United States, and the rest of the world, who dislikes the West.
The United States is not going anywhere. Spain was once a Global Empire. Great Britain was once a Global Empire. The United States was once a Global Empire. Whether it was Karl Marx, or Nikita Khrushchev who said, “We will take America without firing a shot” at this point it does not matter. Freedom, it appears, has become our worst enemy. Political parties have become allowed to be militant and dishonest while the common population sits on their hands with frustration that their only tool, the vote, seems to have dulled.
Taking matters into our own hands regarding our finances is critical at this point. Make no mistake, the most recent stock market crashes in 2001 and 2008, will look like a Sunday picnic compared to a fall from an overbought 33,000. The primary impact of those two market crashes was the length of time it took to recover. Both events wiped out over half of portfolio values and took 7 years to get back to even for those that rode it out. Today, there are $36.7 Trillion in total retirement assets in the United States. The two questions every individual investor regardless of portfolio size or retirement account balance is, ”can I afford to lose half of my retirement savings at this time of my life?” and if so, “can I afford 7 years of no growth?”
GMR Gold will never recommend and will never endorse having 100% of your assets in metals. Those that had a position in Gold and Silver faired much better than those that didn’t in ’01 and ’08. There is never a bad time to buy Gold. But some times are better than others.