By: Gary Christenson 

“Inflate or die” was Richard Russell’s characterization of our economic system and the central bank response to most problems during the past three decades.

INFLATE THE CURRENCY SUPPLY!  Examine the currency supply as measured by M3 and reported by the St. Louis Fed.

Fiat currencies are created as debt.  Inflating currency supply means increasing total debt.  Global debt exceeds $200 trillion.  Per the St. Louis Federal Reserve, total debt securities in the U.S. exceed $40 trillion.

Official U.S. government debt is $20 trillion and has increased exponentially for over a century.  Unfunded liabilities are 5 – 10 times higher.

Debt and M3 rapidly increase, while the economy and population slowly increase. The currency supply is continually inflated. The result is much higher prices for most goods and services, including wages, food stamps, gold, cigarettes, cars, gasoline, medical care, college tuition and many more.

“Food Stamps” program costs have exponentially increased for 35 years.

This is an ad for clothing from the 1930s.  Prices are much higher today because the dollar has been devalued by more than 90% since the 1930s.

By contrast, consider this ad from a recent Costco flyer.

Premier beef from Japan is on sale at three pounds for $399.00.  Yes, over $100 per pound, but very special.  Ordinary grocery store meat is cheaper, but far more expensive than when President Nixon severed the last link between the dollar and gold in 1971, thereby escalating the inflation of the currency supply.  Dollars devalue and prices increase, regardless of official statistics that show practically no consumer price inflation.

OBSERVATIONS:

  • The wars in Afghanistan and Iraq continue. It benefits the military-industrial complex, lobbyists, and congress-persons to prolong these wars for decades.  If a war is fought to be prolonged, not won, we usually dislike the results.  Vietnam, Iraq, Afghanistan, and Syria come to mind.
  • The U.S. may expand military adventures in Syria.
  • New wars with Russia, China, Iran, and North Korea are possible.
  • Wars are expensive. Since government expenses have exceeded revenues for decades, new and expanded wars will require larger increases in debt and currency in circulation.  Consumer prices will rise even more.

Option One – Reductions, Depression, Crashes, and Dreams:

Reduce Federal government expenditures, reduce the number of Federal employees, cut military programs, cap expenditures for Medicare and Medicaid, and  …  DREAM ON!

Option Two – More of the Same:

Continue “borrow and spend” policies, maintain and expand wars, forget cut-backs in government programs, accept occasional market crashes and expect national debt to increase at 8 – 11% per year “forever.” Watch gold and silver prices increase!

Note:  Consumer prices for food, energy, clothing, housing and transportation will increase.  Are you prepared with an adequate quantity of gold and silver bullion?

QUESTIONS:      

National debt, currently $20 trillion, has doubled every 8 to 9 years for a century.  If it doubles as it has historically, national debt could reach $160 trillion in 24 – 27 years.

  • Can the U.S. economy support $160 trillion in debt?
  • How much dollar devaluation will be required to enable this level of debt?
  • What will a house, loaf of bread, or an ounce of gold cost when the national debt reaches $160 trillion? Ten times more than today? One hundred times more than today?
  • Do you believe that Social Security payments and private pension plan payments will increase as rapidly as your cost-of-living increases?

If interest rates average 3% and national debt grows to $160 trillion, then ANNUAL interest expense in the 2040 decade will be approximately $5 trillion.

  • Is this plausible?
  • At 6%, the annual interest expense will be $10 trillion.
  • Can interest rates ever be raised to “normal?”
  • What are the ugly consequences of rapidly rising debt along with rising interest rates?

If you are digging yourself into a dangerous hole, should you stop digging, or dig faster?

Does the “borrow and spend” policy appear sustainable?  New and expanded wars accelerate debt increases and dollar devaluations which increases consumer prices and economic instability. Is another “2008 Crisis” on the horizon?

Do the actions and policies of our central bankers and political leaders inspire you to consider self-protection, gold bullion and silver bullion?

Extreme measures may be used to extend the “borrow and spend” paradigm as tax revenues stagnate, and confidence in fiat currencies sinks toward the current level of confidence in congress. How much time will the following buy?

  1. Negative interest rates
  2. Retirement funds appropriation
  3. War on Cash
  4. More QE and “printing”
  5. More wars and martial law
  6. Other “extreme measures” that may be used.

 GOLD AND SILVER!

Read:  Why have western vaults shipped 1,000 to 2,000 metric tons of gold bars each year to Asia?

Did the world reach “Peak Silver” in 2015?  Read “Chile’s Silver Production Down a Stunning 32%”

Gold 12 Year Wedge Pattern Will Soon Resolve – Probably Upward!  Expect higher prices.

 

Read:  Gold Erases Flash-Crash Losses As Dollar Slides

 Silver Eagle Sales in July were stronger than in 2016.

Huge sales of Eagles since the 2008 crisis!  Many people (not enough) sought protection via Silver Eagles.

CONCLUSIONS:

  • Inflate or Die!

  • Bankers, politicians, Wall Street, lobbyists, government employees, corporations, and most people will choose inflation.
  • Consumer prices will increase as debt and currency in circulation rise.
  • Official statistics show almost no consumer price inflation. Believe the statistics at your own risk.
  • Wars will continue and expand, which will require additional inflation of currency in circulation and the devaluation of fiat dollars.
  • Change will eventually be necessary. Reset, a new currency, rise of the IMF Special Drawing Rights (SDR), horrible depression, responsible congress or  …?
  • Governments and central bankers are digging us into a dangerous economic hole by massively increasing debt. They could stop making the debt hole deeper… but will they?
  • Gold and silver bullion and coins will protect purchasing power better than most other alternatives.
  • Gold and silver stocks and cryptocurrencies, though volatile, will expand your purchasing power if bought correctly.

We believe precious metals are bottoming and about to break out following the summer doldrums. August and September are typically two of the strongest months and we have 3 highly prospective junior gold stocks in our sights. Subscribe now to get our top stock picks, monthly newsletter, portfolio and trade alerts:

Article written for Gold Stock Bull by Gary Christenson of The Deviant Investor