The Next Spender-in-Chief Will Drive Gold Higher As They Pump Up Spending To Record Levels While The Cost Of Servicing The Debt Breaks The Debt Camel’s Back

It doesn’t matter which candidate wins the election, they are both massive spenders that will drive debt much higher. Neither candidate has said much about the Death Spiral of Debt because they both helped get it to where it is now. 

Like any addict, the first step to recovery is admitting you have a problem, neither candidate did that during their campaigning which means they aren’t planning to do much about it other than make it worse. Heads gold wins, tails gold wins.

Trump supporter Elon Musk has talked about the spending problem, but the government is not Twitter and slashing spending comes with a heavy political burden. The cost is people revolting, and that is not good for politicians, which is why they spend like drunken sailors in the first place. Sorry Elon, he won’t let you slash spending, even though he should. 

My hope is that Trump wins, one because he will get America out of wars and because despite his economic plans have issues concerning inflation, they aren’t economic suicide like Harris’ plans.

The previous Trump term in office and Biden-Harris administration have been devastating when it comes to spending. The Obama regime was the worst ever by a country mile for a two-term president. Collectively, they caused the inflation issue, helped from prolonged near zero interest rates by the Fed.

Now the debt is so massive, combined with the current interest rates, it has made it so that the cost of servicing the debt is the straw that will break the debt camel’s back. This is not complex economics, it is simple math. 

It has reached the point where the solutions will cause political revolt. Slashing spending while also increasing taxes are the realistic solution. Regardless of how politically painful they would be. Then the Fed has to cut rates to near zero, plus increase their balance sheet, allowing the economy and inflation to run much hotter than they would like. 

The key reason that I say heads gold wins, tails gold wins is because there is zero chance of politicians slashing spending and increasing taxes. 

The Fed has to cut rates because the debt is in a crisis made worse by the cost of servicing the debt with rates where they are now. Even if they cut by a couple percent, it still won’t fix the cost of servicing the debt because the next president will be the next record holder for spending.

The Fed declared victory over inflation at their last meeting, then went with an emergency cut of a half-point, followed by insulting everybody’s intelligence when they pitched the Goldilocks economy narrative.

The debt market isn’t cooperating with their narrative and yields have gone up, which means the Fed will have to crank up their balance sheet after ‘normalizing it’ from $9 trillion to $7 trillion to get yields down so they can continue with their rate cutting cycle. They will have to get back into the QE business or stop cutting rates. This week they have to pick their poison.

QE during what they call a Goldilocks economy is a sign that trying to save a soft landing is getting more troublesome. But they know that the jobs market is in trouble which means the economy is as well, otherwise they wouldn’t have gone with an emergency level cut of a half-point.

Their words may say Goldilocks, but their actions tell a whole different story. Their Goldilocks pitch relies on artificial jobs numbers from the inept BLS when workers know that the dots ain’t plotting to a strong jobs market.

Another good thing that will come out of a Trump win is that he will fire Powell and his crew. Which will make for panic behind closed doors at the Fed meeting if it looks like Trump will win.

Today is a vote for which Spender-in-Chief gets the nod. Then the Fed has to announce if they keep going with their rate cutting cycle or admit the buyer’s strike in the debt market has foiled their plans.

Smart money players have given investors the path forward with all roads leading to gold. The Death Spiral of Debt was caused due to abandoning the Gold Standard. Nothing is stopping investors from putting themselves on their own Gold Standard.

All the best,

Allan Barry Laboucan