Forbes: Record High Debt and Record Low Yields Are a Boon for Gold

September 10, 2019

Article by Frank Holmes in Forbes website

For the 2020 fiscal year, the federal budget deficit is expected to hit a massive $1 trillion—the first time in U.S. history that it will have expanded so rapidly in a time of peace and prosperity.

The most recent estimate by the Congressional Budget Office (CBO) puts total federal debt at a whopping 144 percent of gross domestic product (GDP) by 2049.

This level of debt is not only unprecedented but also unsustainable. It puts everyone’s financial security at risk.

And if you’ve been keeping up with the Democratic presidential debates, things could get even worse. Medicare-for-all, the Green New Deal, reparations—these programs, while admirable and potentially beneficial, would add trillions more to the already-ballooning national debt.

Remember, it’s the policies that we should be paying attention to, not partisan politics.

Years ago, it might have taken $1 trillion to move the U.S. economy by 2 percent of GDP. What is that number today? It might take $10 trillion or more.

In a recent blog post, Rick Rieder, chief investment officer at BlackRock, writes that we could be at what he calls the “monetary policy endgame.”

In recent years, central banks have deployed nearly everything in their arsenal, including zero and negative interest rates and quantitative easing (QE). The last stage could very well be extreme currency debasement. For that to happen, rates would need to be taken deeper and deeper into negative territory as economies compete for the weakest currency.

“How should one position for such an endgame?” Rieder asks. The solution, he says, “is to hold an asset that maintains its real value—an asset that cannot be printed.”

Such assets include dividend-paying stocks and “commodity currencies,” including gold, which is limited in supply and expensive to extract.

To read this article in Forbes in its entirety and view the relevant charts, click here.

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