U.S. Debt Is Growing Out of Control, Precious Metals Lagging Behind, but for How Long? – Nathan McDonald


by Nathan McDonald, Sprott Money:

Without a doubt, gold and silver bullion have offered protection throughout the course of the COVID-19 crisis. They have helped people weather the storm and have stood their ground, unlike many other sectors of the economy.

However, standing your ground is not enough in this time of runaway fiat money creation, when the stock market is rallying back to all-time highs despite the fact that businesses are going bankrupt all around us and social upheaval is everywhere.

No, precious metals should be doing better. And mark my words: they will do better in the coming months and years.

The world has entered a new era, one in which fiat money is created in such vast quantities and so frivolously that with each passing day it becomes increasingly more obvious just how bogus our fiat-based money system is.

Debt Creation is Out of Control

As I have pointed out in previous articles, the debt level of the entire world has ballooned higher since the start of the COVID-19 crisis. However, there is one country that has outdone all others: the United States of America.

(Source, SRSrocco Report)

Looking at the chart above, you might say, “Hey, what’s to see here?” Or, “More par for the course!” And at first glance, you may be correct…until you look at things more closely, in just a slightly higher resolution and thus more detail:

(Source, SRSrocco Report)

Now that does not look good…

As the chart above indicates, the average daily increase of U.S. public debt from 2007 to 2019 was $4.4 billion, which is absurd in its own right and completely unsustainable. However, this is just a drop in the bucket when compared to how much of a dumpster fire 2020 is shaping up to be.

What you have to realize from the first chart shown is that U.S. public debt has already increased by approximately $3 trillion since the end of Q4 2019, to roughly $26.1 trillion total today.

This rapid escalation in debt creation becomes even more startling when you look at the second chart and understand just how quickly things are spiraling out of control, with only 116 working days passing when the chart was created—meaning that the average increase in U.S. public debt is increasing by approximately $25 billion PER DAY in 2020!

This is five times the average of 2007-2019. To say this is not good would be an extreme understatement.

When the Fiat Money Comes Home to Roost

At present this money is flowing into the stock market, and as is typical, it is going to those who are already fabulously wealthy, while many continue to suffer and just get by. However, there will come a day when this newly created money enters back into the system, flooding the world and causing many real world assets to rocket higher in price.

Precious metals will be one of the chief benefactors of this new era, accounting for all of this newly created money and resetting at new ever-increasing highs.

“Smart money” is already hedging their bets and buying depressed hard assets, such as energy and precious metals. They have been doing this throughout the course of this crisis and will continue to do so in the coming months and years, as they can see the sun setting on the horizon. The day of fiat reckoning is rapidly approaching.

Both gold and silver bullion have stood their ground throughout the course of this year, with gold bullion up by 28.11% year over year and silver bullion up by 16.3% year over year. These are significant gains, but nothing compared to what is coming.

I believe we will see ever-increasing highs as more and more people flee the paper Ponzi scheme, seeking the protection of precious metals and other tangible hard assets. I believe that the lofty projections of some analysts who predict $5000 per oz. gold prices will not seem so unreasonable in 2-3 years.

Also, I believe that silver bullion will see gains greatly outpacing that of gold, thanks to silver’s dual nature as a vital resource in many industries plus a hard money asset. This will result in the gold to silver ratio returning to a much more reasonable and historic average.

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