News & Opinions About Gold & Silver

February 25, 2024

Don’t Complain About Debt

Don’t Complain About Debt

Let me apologize for complaining about debt. I should love Government debt, you should love debt, anyone who owns Gold should love debt.

Lots of government debt means near zero to negative interest rates as far into the future as the Federal Reserve and World Bankers can see. The Fed has gone on record—

Dallas Federal Reserve President Robert Kaplan said Monday 9/21/20 that near-zero interest rates will likely be needed for the next two to three years. 

In trying to get my head around these zero interest rates, it means the U.S. Government can borrow all the money it wants for free. They borrow another Trillion Dollars… or three or four… the cost is zero on the interest. As long as the nation rolls over the debt and never attempts to pay down the debt, the borrowing and spending will continue at an ever-faster pace.

World of Negative Interest

If you think near-zero interest rates are nutty, the Bank of England is about to join the NEGATIVE interest rate party. They will become the sixth large central bank to go negative interest.

The European Central Bank and the central banks of Denmark, Japan, Sweden, and Switzerland, have started experimenting with negative interest rates —essentially making banks pay to park their excess cash at the central bank.

Investopedia defines it this way— Negative interest rates occur when borrowers are credited interestrather than paying interest to lenders. With negative interest rates, banks charge you interest to keep cash with them, rather than paying you interest. (Aug 11, 2020)

Negative Interest Rate Definition – Investopedia

In a World of Fake Money, There’s Always Gold

Let’s think ahead and see how it works out saying your paper money is not worth paying a dime of interest. first, some background There are two negatives that Wall Street has always hits Gold investors with—

  1.  Gold pays no interest and no dividends.
  2. Gold is the perfect inflation hedge, but the U.S. has had little official government inflation for years.

Number one is correct, number two “no inflation” is a myth. But with near zero interest on savings accounts, CDs, etc. that changes things greatly in favor of the risk/reward for holding a little Gold.

If a bank pays you very little interest, no interest or makes you pay to have a savings account— this negative about Gold disappears.

Money sitting idle in the bank, currently has inflation risk. If inflation is a mere 2% a year, you lose 10% of your savings’ buying power every five years.

Now, let’s kick that up and say inflation at 5% for five years and the government steals 25% of your buying power every five years, but pays you almost no interest.

Pretty soon, many of us will begin to ask ourselves, “Why are we saving our money in bank savings or government bonds that yield zero or even negative real interest, and have an unlimited supply.

Shouldn’t we hold some Gold as an inflation hedge in these uncertain times when the Federal Reserve is printing an endless supply of U.S. Dollars? It will take some time to realize that the Stock Markets are the number one example of inflation and what happens when the Government floods the market to save Wall Street from a meltdown

We’ll see more volatility in the credit markets as investors rediscover the benefits of Gold.

I can’t recall any trial and error attempt in history more fatally flawed than negative interest rates, unlimited money creation by the Federal Reserve— and risking everything on unleashing inflation.

Why Today is a Golden Opportunity

What is the money of last resort when the Federal Reserve destroys confidence in the Dollar? Will you personally want to trade your Dollars for Euros, Japanese Yen, Danish Krones, Swedish Kronas or Swiss Francs?

Or maybe you’d want a Vietnamese đồng? Yes, that’s what they call their money.

When worldwide trust leaks out of the U.S. Dollar, the currency of last resort will always be— GOLD!

Will this happen tomorrow, next year, in the decade ahead— we dare not speculate. My worse fear is that the CoronaVirus pandemic will rapidly escalate the debt crisis and the time frame the Federal Reserve has to manage it.

Before the pandemic, confidence was already falling in the free market system. Our ineffective government management became obvious during the pandemic. In the weeks ahead of the election, Americans will be bombarded with negative ads for why the incumbent politicians are all crooks, thieves, liars, and idiots.

But this new guy (or lady) is the solution to all our problems.

Regardless of who is elected or which party they are in, the vast numbers of Americans will only remember the overwhelming messages—

We are not safe.

Politicians cannot save us.

We should not go to church.

We can’t go to school safely.

Wear a mask.

In this environment, the Feds can sneak past us lots of things. They hope we won’t notice their “grand experiments” of almost negative interest rates and rapidly rising inflation.

From a financial perspective, we recommend you wear a mask— a mask of golden threads and keep a nice stash of Gold bars or coins in your safety deposit box. 

Be patient and wait. Every paper currency ever created has failed— give enough time and political tinkering.