American Exceptionalism Is On The Ropes While Gold And Silver Are Primed To Go Much Higher

The three pillars of American exceptionalism are Wall Street stocks, US debt and the US dollar. All three have cracks in their narratives that could turn into serious corrections, especially the US debt market.

Unprecedented supply of US debt is a major problem, but if buyers keep supporting the house of cards it can be propped up. But for how long? The amount of debt and cost of servicing it are unsustainable, as is the addiction to spending and debt in Washington.

Although there has already been a significant correction in US Debt since reaching 52-week highs in September, they still look extremely risky due to the amount of debt and the cost of servicing the debt.

Foreigners are getting a second slap in the face because since the US dollar topped in January, 2025, the currency they get paid their yield in has also been dropping. Foreign holders and buyers have to be questioning why they own so much US debt and why they should consider adding to their positions.

The 5-year, 10-year and 30-year durations all have a similar chart since topping, they are forming charts that in the next few months will be from the top right to the bottom left. The 2-year chart has also seen some pressure, but is hanging in pretty well.

This suggests that participants in the US debt market are anxious about lending the US government money for the long-term and somewhat comfortable only lending the degenerate spenders and debt junkies in Washington money for short-term periods of time.

Whenever there is extreme supply in any market (even the so-called risk-free US debt market) it is a buyer’s market. Based on the trends, the buyers want a higher vig to lend money to the degenerates in Washington and prefer to lend for short periods of time.

I don’t blame them and think they are being overly generous with the vig they are asking for as I guess they need to support the Ponzi scheme. If I were the loan shark (bond vigilante) I would be asking for a much higher yield. Lending money to degenerate spenders and debt junkies at modest rates does not sound like a smart money move.

Especially when they have been totally irresponsible (on the left and right for much too long) with their credit card and the cost of servicing the credit card is an alarming problem. These situations will only get worse with Trump and the GOP’s big spending bill. Which pushes minimal cuts in spending out to when Trump’s second term ends, while cuts to taxes happen immediately. That will drive deficits through the roof.

No wonder Elon Musk blew a gasket and abandoned DOGE when he came to terms with the reality that he helped elect a spending junkie and his party that have no intention of slashing spending. Any savings that DOGE can get before it is completely disbanded will be gobbled up by spending elsewhere and you are mistaken if you think it won’t all be spent elsewhere and then some.

That is the way things go with politicians in Washington, the Democrats and Republicans are no different, the only difference is who benefits from the insane spending and growth in the debt. They all have their masters that help get them elected, and those masters always get paid.

Elon Musk pumped a tremendous amount of money into getting a degenerate spender and debt junkie and his party into power. Then he focused DOGE on waste, fraud and abuse solely on those doing it on the left and ignored those doing it on the right. When everybody knows waste, fraud and abuse in Washington is a bipartisan problem.

He also focused on departments of the government that set regulations and enforce them on his companies.

Even he saw the writing on the wall that this big spending bill is not slim and beautiful instead it is big and ugly. So his stint in Washington has come to an end and he is trying to distance himself from the big spending bill and repair his damaged reputation and focus on his businesses.

He came face to face with the Washington degenerate spenders and debt junkies in the latter days of his journey to Washington. Rumors are that it led to fisticuffs that got him a black eye when he confronted the swamp creatures trying to promote the big spending bill as beautiful.

The big spending bill is Washington doing its thing without any regard for the level of debt and cost of servicing the debt. Same old, same old.

To add salt to the wound, the big spending bill wants to increase the debt ceiling by $4-5 trillion, which will only look after a couple years of deficits. Bessent is supposed to be the economic adult in the room, yet he and Trump want to eliminate the debt ceiling entirely. They didn’t go for that in the big spending bill, but you can rest assured they will take a stab at it later.

What all this means is that the level of debt that currently stands at $37 trillion is only going to get much worse. And that Bessent’s delusional belief that America can grow the economy faster than the debt is a farce. So much for the economic adult in the room.

Sooner than later, the bond vigilantes have to come to reckoning with the Death Spiral of Debt, made worse by the cost of servicing the debt and spending in the big spending bill.

Another concern that they have to come to terms with is that Trump’s tariff tantrum is going to make the stagflation problem worse. Much like during Biden’s term, the economic stats coming out are overstating economic growth and understating inflation. You can change the players, but the new guy has his finger on the scale just like the last guy.

Consumers and corporate leaders feel the real economy much differently. Surveys of consumers are suggesting that they are fearful of the economy slowing and inflation gaining strength. Those surveys are dismissed as biased to the left. But, those dismissing them have a more challenging issue using that spin for corporate leaders that are saying pretty much the same thing.

Even more telling is that CEOs of Wall Street stocks are suspending guidance due to economic uncertainty. They are certainly not left leaning, plus they have shareholders to deal with so they have to be somewhat careful about what they say. They are unlike the Washington crowd that can spew whatever smoke and mirrors economic nonsense they feel like because they don’t care if they are proven right or wrong as long as they can service those that helped them get elected.

As the CEOs of Wall Street stocks can’t give forward guidance due to economic uncertainty, their stocks are being priced for perfection. No guidance due to economic uncertainty doesn’t sound like perfection to me. Which means that Wall Street stocks are susceptible to a significant correction.

All three pillars of American exceptionalism are on shaky ground. The Death Spiral of Debt and cost of servicing the debt will only get much worse due to the big spending bill. While the Wall Street stocks are priced for perfection as the CEOs can’t give guidance due to economic uncertainty.

If foreign buyers of US debt and Wall Street stocks go on a buyer’s strike, they don’t need to buy US dollars to buy those assets. Which puts the third pillar, the US dollar, in a precarious position.

The biggest American exceptionalist, Warren Buffett, has concerns that he expressed at the recent Berkshire Hathaway annual shareholder meeting. When he stated: “We wouldn't want to be owning anything that we thought was in a currency that was really going to hell, and that's the big thing we worry about with the United States currency.”

The entire global fiat currency and debt system is broken, which is why gold is trading at or near record highs against all of them.

Just because people believe that the US dollar is the cleanest dirty shirt in the pile of fiat currencies, doesn’t mean it is a good investment, regardless of how liquid it is. Especially when there is a perfectly clean shirt, the soundest form of money there is, gold.

The central bankers of the world have driven the Euro to third place in their currency reserves with gold in second place sitting at 23%. What practically none of the promoters of the cleanest dirty shirt theory talk about is that in a short period of time, the US dollar has dropped from around 60% to its current level of 44%.

What is happening before our very eyes is that the central bankers of the world are hoarding gold while decreasing their holdings of the Euro and the US dollar.

Fueling this trend is the Death Spiral of Debt, alarming cost of servicing the debt and the relentless spending by politicians in Washington. The hoarding of gold by central bankers really started after the 2008 GFC and has picked up remarkably over the past few years as the buying of gold by central bankers have reached record levels.

The buying of gold by central bankers has caused it to breakout over $2000 in early 2024. Since then it has gone from the lower left of the chart to the upper right. Along the way it has made a series of record highs.

Recently, gold has gone through a basing period, hitting the low end of the range in the middle of May. Since then it has made two higher highs and two higher lows. It is perfectly primed for another important breakout to new record highs.

Silver is also going through an important breakout. In the past, silver got to $50 two times, but what is also important to consider is that it has spent very little time over $35. Recently, it broke out above $35 which I think will prove to be as important as when gold broke out above $2000 in early 2024.

These prices for gold and silver are fantastic gifts to the bottom lines of gold and silver miners. They have already made gold miners free cash flow machines. And I can see silver making a run to record highs and higher in the short-term which will make silver miners free cash flow machines.

As bullish as I am on gold and silver, I am even more bullish on the gold and silver miners. While also emphasizing that the junior miners, developers with high-quality projects and explorers with important discoveries are in short supply. Yet, their valuations are historically cheap and haven’t even priced in current prices let alone priced in much higher prices for gold and silver.

There has never been a better time to be a gold and silver bull, and even better to be a bull on the stocks of companies in those precious metals that are getting more precious by the day.

All the best,

Allan Barry Laboucan