DEBASEMENT
How quickly the news cycles turn… This time last week, geopolitical instability in the Middle East was of primary concern.
Now, after another US/UK/France (no Germany) “Mission accomplished” we move to the next big “thing”, and we’re still no closer to piping gas through Syria, from Qatar, to Europe.
Despite the US trade and hot war “victories”, financial markets continue to wobble up and down in a manner we’ve not seen in many years.
One thing is for sure, there is no wobble in the rising pace of US government debt levels.
Straight up and, in our view, worth keeping an eye on from time to time.
Like, in the last 6 months to end of March, US government debt rose by 1 TRILLION dollars, to 21 TRILLION. The 18 TRILLION ceiling of a couple of years ago looks a long way back in the rear-view mirror.
For the month of February, said debt rose by $215 BILLION, about the size of the New Zealand economy.
And for the Thursday and Friday, just one day last week, according to the Sovereign Man Blog, $73 BILLION, IN A DAY.
With just the US military requiring upward of $900 BILLION for the next year, this type of action is certain to continue.
No one seems to bat an eyelid. As out of control as these numbers are, try and have a conversation about it with someone without watching their eyes glaze over. Main stream media don’t want to know about it, nothing to see, move on. She’ll be right!!
Like there is nothing to see watching a FIAT money system experiment in full flight or on its last legs.
The risks are worthy of consideration, in our view. Currency debasement is almost assured. But if everyone is in the same boat, debasement against what, should be your concern.
The fact is, the pace of this “issue” is rapidly accelerating and as we’ve stated many times before, there is no plan B.
However, some Sovereign nations are unwilling to support this acceleration and excess promises such as the $100 TRILLION of unfunded pensions in the US. Some are not willing to go down with the ship. What do you think they are doing? They may not be the only ones collecting precious metals right now.
The comfy feather bed of US dollar/petro dollar hegemony is now being challenged.
So now, right on cue, the IMF issues a warning that the world debt now is now more than twice the size of GDP and that it is now urgent that to reduce the burden of debt in both the private and public sectors to improve the resilience of the global economy and provide greater firefighting capability if things go wrong!
Good luck getting anyone on board for that. It simply easier to print more money to debase one’s way out of whatever may be blocking the road.
With this sort of trajectory, below, and the associated ticking bomb of associated debt derivatives, is it any wonder that interest is high in precious metals.
Faced with the future the above shows, its no wonder some continue to accumulate gold.
Even a small investment allocation to gold (not paper Gold) will be more than most!
So here is a reminder of some of the why’s, courtesy of Matterhorn Asset Management.
- It has been money for 5,000 years
- It is the only money which has survived throughout history.
- It guarantees stable purchasing power over time.
- It is scarce – It cannot be printed. (Unlimited paper gold creation will soon collapse.)
- It is durable – All the gold ever produced still exists.
- It is nobody else’s liability – Thus no counterparty risk.
- It is held and traded outside a fragile financial system – Thus gives independence.
- It is the ultimate wealth preservation asset and insurance against a rotten world economy
And finally, this below also got our attention this week. “Jammed lines fuel the crash”.
The relevance is, do you recall what “Wall Street” was watching most closely during the early Feb market hissy fit?
Passive investment vehicles, ETF’s of course. This “industry” created in the easy money post GFC environment has never been meaningfully tested to the down side!!
And whilst there are many “good ones”, these and their derivative cousins will be the most likely culprits to block the system next time.
No Margin for error folks!
Let’s not leave out the largest of them all! Deutsche Bank!
We think Syria less complex.
