Bond Market Meltdown
Forget the printing press; the bomb that will blast gold prices into the stratosphere is the coming collapse in the Treasury Market
This past Monday I spent lunch at an eatery in downtown
Any signs of a Great Depression where noticeably absent. The restaurant was packed and across the street three giant cranes ground along, building up the base of what promises to be another hulking skyscraper.
I was lunching with my brothers, one of them Richard, a senior partner with
A long-time associate of Rick’s has been commenting on how the
It is, of course, an anachronism that the U.S. Treasury is printing money. What they are doing instead is creating debt and they are doing it without paper or ink. They are doing it with keystrokes on a computer.
There is actually less than $600 billion in total currency in circulation. Most of it is offshore. And if all those bills and coins were sitting in some giant repository, there wouldn’t be enough of them to bailout the banking industry.
What is really being pumped at an unprecedented pace is debt.
The graph below shows that the
You can see that national debt now equals close to 80 percent of the nation’s
If you think that’s not so bad; we did it before and came out of it fine, consider this: the huge debt burden of the 1940s was taken on to defeat fascism and imperialism. In victory that debt paid huge returns. American democracy and goods spread around the world and the
Today’s resurgence of debt is simply paying the bill for the party we had. We are in this position now because of low taxes, runaway spending and foreign wars. The borrowing being undertaken today isn’t to secure freedom but to simply keep the nation afloat.
And there is something else. In the 1940s through the 1990s,
Today the money we are borrowing is coming from mullahs, pontiffs and dictators. In fact, foreigners own $3.3 trillion in U.S. Treasury debt. And the
Rather than printing money,
As I have said before, more money does not mean greater wealth. Inflation is an economic Band-Aid. It is applied by governments that don’t have the courage to accept remedies that would cause a recession, or in today’s case, a depression.
Instead leaders almost always opt to prop up a soft economy by creating ever greater amounts of money. But nations that pursue this course are really no different than an individual that plays the futures market. Sooner or later they are going to face a margin call.
By buying up Treasury debt, other countries have enabled the
Heading for a Dollar Debacle
These countries have been happy to do this for the past three decades because until just lately,
That is no longer the case says Jim Rogers, the charismatic chairman of Rogers Holdings.
"I’m afraid they're printing so much money that stocks could go to 20,000 or 30,000"
"I would suspect that somewhere along the line...someone's going to say, 'I'm going to start selling mine before everybody else does,'"
Rather than put money into stocks,
To read all of
In Gold They Will Trust
While I agree with
The chart above shows the cost to nations that are holding the bag with U.S. Treasuries.
And I cannot harp on this enough. The gold market is extremely thin. Last week I pointed out that all the gold mined in the world this year will be worth around $80 billion. Yet, this week alone the U.S. Treasury will auction off $65 billion in new debt! If just a fraction of this money went into bullion instead of Treasuries, gold prices will quickly soar above $1,500 per ounce.
Action to take: Continue to add to your physical gold holdings. Next week I will have more on the Midas metal, including why I believe it is an incredible bargain below $1,000 per ounce.