What Explodes First? Debt Bomb or Gold Price

I knew our debt problems were bad but this is downright scary.It has been considered that a debt ratio above 90% of GDP was dangerous.It was believed to be the prelude to default as it marked the point at which we could no longer afford to pay just the interest due on all of our debt obligations.

To know what that means, just consider what happens to you when you can no longer afford to make the minimum payment on your credit card debt.First, your ability to borrow goes away and then your possessions against which you have borrowed money.Or, of course, there is the bankruptcy option.

If that's the case, this chart taken from an article by Chris Martenson just marked what might be the beginning of the end of our financial life.

The Blue Arrow points to 1929 and the red circle marks a time in 1985 when debt began to skyrocket.As you see, today's total debt to GDP ratio has risen above 320%.Ouch!!!During the Great Depression, that level peaked near 260%.

By all accounts our dollar may already be worthless.Something is going to give.Obviously, debt that is more than triple our GDP is only sustainable by printing more money.How else can the payments be made?

The signs are there.The Fed's recent move to buy up Treasuries, is clear evidence that there are not enough external buyers willing to take further risk.Now we see why.

As others have written before, the debt bomb fuse has been lit.When it blows, gold prices could easily explode with it.

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Which do you think explodes first?