Still at Buy Low for Silver and Gold While Government Spending Reaches Panic Levels

I know many investors out there are hesitant to buy silver because it has lagged the market the last decade. I get it. But as I have pointed out, silver is insurance against your dollar based portfolio. If the dollar falls, and presently it is, silver maintains its purchasing power and thus buoys your portfolio. You can see the dollar represented by the Dollar Index (DXY) has been falling for more than the last month. Is it any wonder gold and silver prices overall are taking off?

 

With gold hitting record highs, silver is lagging at present. You can pick any date in time though and a 90% silver quarter minted before 1965 where it could buy you a gallon of gas, can still buy you a gallon of gas today when exchanged for the scrip of the day, the U.S. dollar. Today for example that quarter will buy you $5.11 worth of gas.

While a pre-1965 quarter is worth $5.11 today, and we have inflation well above the Fed’s target goal of 2%, which of these speaks the truth as to our current economic situation?

Out of Control National Debt – Time To Panic?

I have spent over a decade writing about the U.S. dollar and the truth is, our government has done a pretty good job at getting investors to not thinking about gold as a viable part of ones portfolio, let alone competition to the U.S. dollar. How did they accomplish such a feat? They raised interest rates to double digits and got investors to put money into the banks again to lock in a high rate with CDs and thus there was an outflow of gold into dollars. This lasted about 20 years and instead of the government shoring up its balance sheet and reducing debt, what did they do instead? They added to the national debt every single year. No matter who was President, the national debt went higher.

Some say that President Clinton reduced the debt but alas, all he did for a short time was reduce the budget deficit. That’s akin to you cutting your spending in a year by a few dollars as shown in my favorite video of all time which I have presented in my articles several time.   In that video it shows how this individual applying for a loan cut his budget by $385. He was proud he cut his spending. It represented 1% of his budget that he cut.

What the video brilliantly does is correlate this individual who clearly doesn’t have the income to afford the trip to Australia or other things he wants to do was able to get a loan by having his own 2 year old child (in crayon mind you) sign away her future so they could continue to party on today. And they show in the next slide this is exactly what the government is doing and while reading this, look at how they were mocking the U.S. government when the national debt was only $14 trillion. Today it is $34.7 trillion and the budget deficit is $1.96 trillion with no spending cuts in sight and a Debt to GDP Ratio of 122.25%.

The Federal tax revenue is $4.8 trillion a year and the interest on the debt is $827.2 billion a year. Keep also in mind we spend $888 billion a year on Defense/War while we spend $1.76 trillion on out of control Medicare and $1.43 trillion on Social Security. Add all of these up and it is more than the Federal Tax Revenue. We are a sinking ship at the current rate of government spending, yet the dollar doesn’t see this yet. Why? Because the dollar priced in other currencies doesn’t paint the whole picture.

(click on above chart to read)

I went ahead and updated the Federal Budget and expenditure table for 5/13/2024 to show how out of control government spending has been.

To make matters worse, the Federal Reserve, who prints money out of thin air and hands it over to the government who pays interest on this monopoly money, also has a balance sheet they are owed by doing quantitative easing the last several years since the 2008 financial crisis. They had been paying down this amount by selling but just last Fed meeting have slowed down the buying and even last report started buying again. Why are they buying again?

You can see just above the red arrow showing the Fed purchases last week that they are $6.77 trillion in debt. The Fed always takes care of itself so any policy they implement is to help themselves out first rather than the U.S. government. Remember, the Fed was created when a bunch of bankers got together on Jekyll Island to create the beast that has allowed our government out of control spending.

As of today we are $40 trillion in debt to our future generations. We are spending $888 billion in funding multiple conflicts without any declaration of war. We have no one in the interest of the citizens in the USA so what happens next? Time to panic?

The Argentinian Peso Crashing

Let’s look to how quickly things could unwind if eventually there are no buyers for all this debt the U.S. keeps creating. Look no further than Argentina who in 2021 had a 50 peso to the dollar exchange rate only to see it shoot up to 884 per dollar today.

What did gold and silver priced in Argentine Pesos do during this same timeframe? Gold shot up to $2,065,990 per ounce today and silver $24,973.62 per ounce priced in pesos.

Based on the above analysis, I can guarantee one thing for most investors; you don’t have enough gold and silver. I’ll repeat what I have written before; no currency has lasted throughout the history of mankind. I wrote a 400 page book on that subject and clearly make the case that today’s dollar and the government that backs it are sliding down this slippery slope to destruction similar to Argentina’s peso. But the Argentine peso is not “priced in other currencies” like the dollar index is. This is part of the “illusion” I write about in my book. It makes it seem like the dollar is still strong, which the index has held up well over the years, but pricing it in other weaker currencies who have the same governmental issues with debts and deficits, doesn’t portray all I wrote above about the real issues.

Yes, It’s Time to Panic

While the U.S. government has had the advantage over most other countries as having the world’s best military, everything else is falling apart in the U.S. Our infrastructure scores a C- grade. U.S. GDP has been declining since Q3 2023. The U7 unemployment rate has been rising every month since April of 2023 and currently stands at 7.4%. U.S. Consumer debt is at record levels of over $17.3 trillion. U.S. homes are unaffordable for 99% of the nation. But hey, the Dow posted an all time high on Feb 23, 2024.

You see, all of that money that’s being printed finds a home somewhere. But where it has found a home will see soon enough the air let out of the balloon as we begin a decade of declining everything except gold and silver. I’ve already made my case to put more into gold and silver today and how to even invest in precious metals with your IRA. 

Unfortunately many will contemplate in the months and years ahead why they didn’t buy low. Many will also chase higher. When the next stock market decline comes, will you be riding it lower or riding metals higher? Which is priced high and which is priced low? Personally I like silver right now.

I’m almost finished with my next book, How To Profit in Up and Down Markets. I’ll make the announcement here.