We have had a nice ride off the bottom in gold and silver which I suggested was close in September and alluded to in my August article. This was my first article since April of 2020 where I simply gave my book away for free as I felt that is all one needs to understand the buying and selling of gold and silver, as well as what happens next for the precious metals.
Fast forward to today, and gold is already at record highs this morning before the banks, who are now short gold, smacked it down $100 off its highs. What does this mean for gold investors when we get a pullback such as we got today? It means you need to step in and buy more as it falls as this is your last opportunity to buy low.
Gold’s Record High Should Set Off Alarms For Your Portfolio
If you look at the cycles of gold, about once every 10 years (give or take) it has a run and we hit new highs. The period of 1980 – 2000 gold didn’t hit a new high but rather was forgotten about. Government spending kicked in and all that excess monetary stimulus went to creating the best 20 years for the market and guess what? It hasn’t stopped. At least until now. But all that spending is catching up to the economy. While those who have been in stocks have enjoyed the results of the stimulus, as new technology and social companies rose to new highs, the consumer has reached its limit in spending as well. When the roaring 20’s were here, everything was great and then the great crash. We have had roaring decades and saw the national debt go from Reagan’s 1982 increase in spending where we first broke $1 Trillion in debt, to the present $33.9 Trillion. That’s $260,000 per taxpayer that is owed. But overall, the median net worth of U.S. households is only $192,900 according to the Fed’s Survey of Consumer Finances (2022). While the median net worth is just over $1 million, it includes all the nations billionaires and multimillionaires that skew the data. If Elon Musk is presently worth $250 billion, that’s 1.3 million households median net worth that 1 person represents. Add in the top 20 billionaires in the U.S. and you get 1.774 Trillion of net worth. This represents 9.2 million households in America.
The point I am making in the above analysis, is your average household is not capable of helping pay off the $33 Trillion of debt and billionaire’s aren’t being told to fork over more (today), so the only way to make the debt seem like it’s a non-issue is to inflate it away.
Inflate the Debt Away or Raise Taxes – The only choices outside of default
Richard Russell is the person who first got me interested in gold in 2002. I was a financial advisor then but didn’t know much about gold. We were never taught anything about gold but I went ahead with my career and by 2006 decided to pursue my CFP (Certified Financial Planner) designation as that is what the industry wanted us to do. I bought all the books and began reading them as I would have to take tests for each subject. I started with the investment book as that is where I wanted to be in the future. While reading, I read what they wrote about gold in the commodities chapter and it simply made no sense. I decided I wanted to become the expert in gold at that time as I had learned so much about gold but needed to learn more. I took 3 years off and researched and by 2010 published my first book Buy Gold and Silver Safely which I updated in 2018. The one thing I learned from all of my research is opposite of what everyone else was being told. That thing was that the dollar can’t crash. If the dollar is a representation of the Euro, Yen, Pound, Canadian dollar and a few others, then by definition, if the dollar crashed, these currencies would have to skyrocket. The problem with that scenario is, all of these countries have tremendous amounts of debt also. Richard Russell famously said one thing that sticks with me to this day, and it’s true for all the currencies mentioned above. He said that we have to “inflate or die.”
What does inflate or die mean? Well, Richard Russell died in 2015 and had been saying inflate or die from at least 2002, and we haven’t died yet. So inflate is all we have done since the times of Reagan and even before. Reagan stepped up the game in 1982 and every President since has said they would do something about the debt and all that has occurred is we have added more debt each time to record levels. And during all this time, Congress has come up against debt ceilings and every single time they raise the ceiling. You see how this game of inflation is played? So how do we die? And is gold sniffing out this death march?
Before getting into what happens next, we need to address one more part of this inflation that is hidden from most analysis. The Federal Reserve, the ones in charge of our monetary system, has also increased their balance sheet adding on presently $7.1 trillion of additional debt through various quantitative easing programs, making them no the “lender of last resort,” but the buyer of last resort. So they magically have been able to make this inflation game and “trust” in the U.S. dollar last longer than most dollar death advocates have imagined. The Fed this year has been paying off some of the debt but I have followed it every week and they don’t seem to be making a dent into it. Remember, all of this is occurring in an overall decent economy and healthy stock market.
When Does Death Occur?
Death of the dollar, and for that matter all currencies, occurs when things get out of control. Things are already out of control but you’ll never hear that kind of attitude from those on CNBC, Fox Business or any leading Financial newspaper. The Wall Street Journal has written nothing on SOMA holdings being an issue and the Financial Times has written a couple articles. One of those articles pointed to the fact that the SOMA has shrunk by $1 trillion since June of 2022.
Here’s the thing. When you possess a printing machine, you can do what you want. But we as individuals can’t print money to pay off our record over $1 trillion in debt we have with credit cards. No, the Fed doesn’t ever help the consumer, but throwing $7 trillion at the banks and other entities, no problem. But this is a dangerous game they are playing. It’s a game where if one loses faith in the Fed, then all bets are off. Gold is starting to sniff this out. So banks went heavily short and allowed an overnight push up and then smacked it down over $100. A $100 fall from an all time high is nothing but a welcome sight for those who understand this game and need to insure their portfolio from what’s coming next; a tsunami of inflation or inflate more or die if I were to change Richard Russell’s quip. In fact, this current administration is inflating on steroids. And most likely the next one will based on patterns. What are they going to cut? They don’t have the guts to cut. The alternative is to raise taxes but no Congressman gets elected by saying they will raise taxes. So inflate is their only policy. And for you that means, buy more gold and silver.
We know one thing for sure, the Fed reacts and they buy what no one else wants. If China wants to sell more of the treasuries they hold, and there are no buyers, the Fed has to step in. The Fed has to provide liquidity where there is none to keep markets stable. Yet they have $7 trillion of debt they can’t get rid of as there is no buyer for it except those in the open market who don’t want it. And you can bet their next move is they’ll be forced to buy more. Then we go from $40 trillion combined national and Fed debt to $50 trillion. Understand our current GDP is $26 trillion. Our current Debt to GDP is 119%.
Another note on banks, is we had Citizens Bank fail on November 3rd. It was only March and May where we had other banks fail that caused all hell to break loose in the markets and see gold fly.
Add To Your Gold and Silver Holdings – Last Opportunity
This will be your last chance to add to your gold and silver holdings at these low prices and premiums. As the price of gold and silver rise, the price and premium rise together. This means it will cost you more to purchase metals. By buying now, you lock in the lower price AND premium. You sit back for a few years and come back and see if I think you should sell some. You won’t regret the price you buy at today and belief me, when the next few banks fail and people lose faith in the Fed, you’ll see many have to buy higher just to protect what they have. Gold and silver are insurance against the spending of the Fed and our government. It’s clear as day that there is eventually and end game. If you are gold and silver you’ll be ready for it. There is a reason we just hit a record high in gold and silver has some catching up to do and should lead gold over the next year.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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