There are a number of reasons for this but one of the main reasons is actually very simple: Our country's debt is larger than our GDP (Gross Domestic Product or the value of our goods and services). To put this into lamest terms, that's like saying that your personal bills are larger than your income. When this happens, you either do something about it OR you go bankrupt. The government has 3 options:
One choice is that they default on their debt, meaning they can’t pay the treasury payments. We don’t believe that will happen. It’s certainly the last choice anyway.
Another choice would be to raise taxes and cut programs. This way eventually more money would come in and if they cut programs less would need to be paid out, and therefore they could pay the debt down to bring it below the GDP. The problem is that they would have to raise taxes across the board on the upper, middle, and lower class. And they would have to raise them a lot. The government can’t seem to get along… the republicans want to lower taxes and the democrats have a 1.6 TRILLION DOLLAR healthcare bill on the table.
The only other real choice left is to monetize the debt; which means print money. You probably heard the term our fed chairman came up with called “quantitative easing”. What that means is “printing money.” Our most recent printing was for 600 billion dollars last year! This is obviously what our government is doing. Europe had done it several times and Germany has done this successfully a few times.
When you print money, 100% of the time it will cause inflation. That’s just the price you pay, and of course they know that. Inflation means the cost of your good and services will go up correct? And it also means that you can buy less with your dollar, or your dollar loses value, becoming a deflated dollar. So the end result is that if the cost of goods and services goes up, then your GDP will go up and your dollar will lose value so you will pay down your debt with a dollar that is not worth as much. That will create the separation bringing the debt below the GDP…
The government will need to continue to print money for at least another 5 years, or they will default on the debt!!! It’s not a choice…!!!
So what does all this mean?
There are 3 investment types: stocks, bonds and hard assets.
Stocks are not making money.
Bonds can only go down as interest rates are so low and have a reverse effect on the value of bonds (when interest rates are low, bonds value is high...and vice versa). This means that bond values are so high that they can only go down from here.
As we go through inflation, the only investment class that will make money is HARD ASSETS!!!
So you have corn, cotton, etc but where would you store a bale of cotton? You can put a million dollars of gold into a shoebox. It’s as simple as that: Right now, the smart investors are investing in hard assets that you can physically save. China and India are buying as much precious metals as possible. Even, Warren Buffet sold all his bonds to put money into precious metals.
This is why precious metals are a great investment and prices continue to soar!
Do you want more information or have questions about investing in gold and silver? Feel free to contact me at blakepollack@gmail.com.
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