Below we look once again at the U.S. dollar.
Certainty in a Time of Uncertainty
Well…It’s now two days since the infamous 2020 election and here we are: Half of you nervously hoping for confirmation a new candidate and the other half of you nervously hoping for some kind of miracle for the other.
For now, we wait.
Democracy, we hope, gets the last say, and democracy, we hope, remains in place—one way or the other, regardless of who is officially determined to be the next U.S. President.
As politicians and those who vote for them stare down a long tunnel of uncertainty and anxiety, and as opinions from the left, right and center spin galvanically like bees near a hive, a couple of issues do remain certain, as well as largely ignored, by the politico’s and pundits, namely:
- US debt and 2) the U.S. dollar.
Today, everyone is exhausted and tense. No need for a long report or my views as to why.
But regardless of who becomes the next leader of the U.S., they have two elephants in the room to either address or hide from.
The First Elephant in the Room
By the time the next U.S. President takes office, he’ll be contending with a $28 trillion-dollar Federal debt.
By 2030, I believe that figure will nearly double to at least $50 trillion.
Given the condition of our broken financial system and the fragility-accelerator that is COVID, we must bluntly accept galloping deficits ahead.
Neither candidate openly confronted this issue, nor the fact that no amount of tax increases or tax revenues will solve the problem.
And despite recent GDP headlines, please don’t hold your breath for enough economic growth to climb out of a debt hole infinitely deeper than the Grand Canyon.
The Second Elephant in the Room
As you know, the only policy going forward, red, blue or paisley, is more borrowing, and the only way to “pay” for that borrowing is more magical fiat money creation.
But folks, printing money also has consequences for the U.S. dollar in your pocket or levered in your local bank.
Nearly every U.S. President boasts about the “strong U.S. dollar” but none of them told those who voted for or against them that their U.S. dollar is getting closer and closer to worthless by the second.
Despite MMT fantasy or Keynesian text books, no economy ever achieves lasting prosperity via unlimited money creation.
If it were really that easy, the entire planet could simply retire and wait for a handout, printed at a central bank near you.
As I’ve written countless times, the only honest voice in a world of fiat currencies is a golden voice.
Gold honestly speaks to what is actually happening to the value and purchasing power of your U.S. dollar.
By gold, I am referring to the kind you can hold and touch, not the kind of gold which the future’s markets leverage by greater than 200 to 1, or the kind that banks “store” for you in non-segregated accounts which essentially gives you a second priority lien-interest rather than actual ownership.
The current gold price doesn’t even reflect the cancerous ramifications of the foregoing debt levels and nearly $7 trillion of currency creation at the Fed.
But for now, as we all pace in a setting of uncertainty and lack of clarity, I’ll just leave you with the following clear graph.
It shows that gold, when placed alongside U.S. money supply, is as cheap today as it was in 1970 (when gold was $35, or in 2000, when gold was $288.
For those looking to speculate on gold price (which will see pullbacks), a long-play is worth of consideration.
For me, I know gold will go much higher, as currency creation gets much crazier in the coming years.
But I’m not looking at gold as speculation, but rather as simple currency insurance.
In short, gold will strengthen not because gold is getting stronger; rather, gold will strengthen because the U.S. dollar, like every other currency in a central-bank distorted world, is getting weaker.
It’s just that simple. That clear. That obvious—unlike our political environment.
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Matt & Tom