In A World Built On Debt - Gold Is The Ultimate Winner
Nothing to see here, servicing the debt only costs around 20% of what America brings in from taxes. The compounding costs of servicing the debt is the straw that will break the debt camel’s back. Unless of course the politicians slashed spending and the Fed went back to the Free Money Era.
Can the worst spender ever Trump (who could lose that title to Biden by the time he leaves office) slash spending? Elon Musk feels that by creating a new department to reduce government departments, will enable Trump to slash spending by a whole $2 trillion over the next few years. That is a big number, but won’t even balance the budget, let alone reduce the debt. It is pretty scary that $2 trillion is a drop in the bucket that can’t even lessen the debt crisis.
Slashing spending is a hard task as the revenue from taxes is consumed, and then some, from medicare/medicaid, social security, interest on the debt and defense. Politicians trying to slash spending on medicare/medicaid, social security and defense will have an uprising on their hands. They would have to eliminate every other expenditure, just to balance the budget.
Before doing that, they would have to get the politicians on the left and right to buy into the plan. That is highly unlikely, about as likely as pigs flying. After all, Elon’s department can only make recommendations, he needs the politicians to turn recommendations into actions. The debt problem is not a left or right political problem, they all love spending and running up debt.
The numbers just don’t add up, and it is unfathomable that a spending and debt junkie like Trump has kicked his addiction. He will cut taxes, with the belief that Trickle-down economics works when it caused Reagan to turn the country from the biggest lender to the biggest borrower and it didn’t work for Trump during his previous term in office. The bottom line is that it doesn’t trickle down, it only increases the gap between the wealthy and the middle class.
During the campaign, when Harris talked about taxing unrealized capital gains, I heard a plan for economic suicide. I felt that Trump was less suicidal when it comes to economics, but here he is using social media as a bully pulpit to threaten 100% tariffs on any country that supports a BRICS currency that would compete with the “mighty” US dollar.
His threats to impose stiff tariffs on Canada and Mexico, two of the top three trading partners of America, if they didn’t bow to his wishes worked. But, threatening the BRICS nations with 100% tariffs is a different story. China shot back with; well then we will stop the flow of critical minerals needed for the military.
Tit for tat trade wars does nothing good for the one doing the titting or the tatting. It will be very good for gold because it will assuredly cause a big wave of inflation larger than the Fed’s “transitory” inflation.
Trump can call the US dollar (USD) mighty in a social media post, but that doesn’t make it so by decree. It really hasn’t been mighty since the country was on the Gold Standard. Since Nixon dismantled the Gold Standard in America, politicians have gone on a spending spree and money printing binge that has destroyed over 90% of the purchasing power of the once mighty USD.
To actually make the USD mighty takes real leadership not social media posts. But, politicians on the left and right, including Trump, are not fiscally responsible. They are enabled by the Fed, which has happily taken on the role of drug dealer that feeds the politicians addiction to spending and debt.
The only real way to fix the problems caused by the Fed and politicians is to go back on the Gold Standard. Or at least that is the easy way. The hard way is defaulting on the debt and starting all over, which also needs gold to play a key part in.
The central bankers inside and outside the BRICS nations have figured out that the cure to the Death Spiral of Debt is to own more gold.
Heads gold wins, tails gold wins.
All the best,
Allan Barry Laboucan
