It is noteworthy that the Federal Debt chart has again turned sharply upward, to nearly an upright spike, rising to 90%+ of GDP. This level of Federal indebtedness had only one precedent: the massive spending that was needed to finance World War II. The current massive over-spending on the Mother of All Bailouts (MOAB) can’t go on indefinitely. At some point, the piper must be paid. In the long term, gross overspending will have some major implications for U.S. Treasury paper, and inevitably for the U.S. Dollar as a currency unit.
I should mention that in 1945 (the peak of the last indebtedness spike), the U.S. dollar was still a net lender nation and our currency was still redeemable–by the citizenry in real silver coinage, and by foreign governments in gold. But since 1985, we have been a net debtor nation, and since 1971, the “dollars” in circulation have been backed only by the hot air that emanates from the District of Criminals. My advice is that henceforth that you don’t believe in any of the following:
- Empty political promises of “Change”,
- Hopes of “winning big” in the lottery,
- Debased and irredeemable currencies,
- “The check is in the mail”
- The long term prospects for governments with bankrupt treasuries,
- Unfunded pension plans, or
- The Tooth Fairy
In many ways the United States is in worse shape than Greece or Iceland–the so-called “basket cases” of Europe. This is because our long-term unfunded obligations (most notably Federal pensions, Social Security, interest on the national debt, and now socialized medicine) are proportionately much larger than theirs. These obligations can be measured somewhere north of $65 Trillion. There is no way, whatsoever, that these obligations can ever be fully met, given the demographics of our aging population. As my maternal great-grandfather was fond of saying in his intentionally fractured Spanish: “No ay ningun posibilidad!” (“There ain’t no way!”) Even if personal incomes were taxed at a rate of 100% in the year 2050, it wouldn’t cover these obligations. So there are only two ways out for Schumer and Company: Either the programs will have to be drastically reduced, or the payments will be made in greatly inflated dollars. I suspect the latter will be more politically expedient.
In the long run, despite the purported “good intentions” of those controlling monetary and fiscal policies, the U.S. dollar is simply doomed. Therefore, I sincerely hope that you, dear readers, are hedging into tangibles! What is in our future? In a word: Inflation.In fact, there is already evidence of inflation getting underway. Perhaps in a few years, we may see sights like this — a sign posted at a public restroom on the Zimbabwe/South Africa border.
I’ve said it before, but I must repeat it. To protect your savings from the ravages of inflation, you’ll need tangibles, tangibles, tangibles! – J.W.R.