US Debt Hits $35 Trillion – Does it Matter?

 

 

 

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Shielding Your Wealth: Can Gold Be Your Financial Safeguard?

Worried about economic uncertainty and potential financial storms? This week’s feature article explores the concept of gold bullion as a form of “financial insurance.”

The article delves into:

• How gold bullion, unlike traditional paper assets, might offer protection against economic turmoil
• What your golden “financial insurance” might cover you against and why holding right “policy” is key
• Why some experts believe physical gold bullion can provide peace of mind and a sense of security in a volatile financial landscape

Intrigued by the idea of fortifying your financial portfolio with a crisis-resistant asset? This article explores the potential benefits of gold bullion as a safeguard against unforeseen economic challenges.

 

Why Gold Bullion is Your Financial Insurance (& How It’s Still Not Too Late to Buy in 2024)

 

 

 

 

Become a Gold Survival Guide Partner

Gold Survival Guide Q&A Call Recording: Analysing the Silver Breakout

In case you missed our recent Q&A call there is a recording available.

The theme was: “Analysing the silver breakout”.

We delved into various charts and looked at:

• Why this current breakout in silver is so significant
• What levels to look for as possible buying zones in the current consolidation or pullback
• Some potential price targets to look towards in the future
• Timing for these targets
• Plus we answered over 30 questions from our readers

 

 

 

 

Crowdstrike: A Lesson in the Importance of Holding Cash

The recent crowdstrike software update and issues highlighted how at risk the modern financial system is to any breakdowns.

We (sort of) joked with some friends that it was a practice run for the collapse of western civilization. But we did also point out to them the importance of having a good supply of cash on hand, just in case of moments like these.

So it was interesting to see this article on Radio NZ highlighting this very issue. But more importantly pointing out the loss of privacy that comes with the loss of cash, and that it isn’t just criminals and money launderers who want to continue to be able to use cash.

The bungled Crowdstrike software update that caused the recent global IT outage has revived calls for society to stop prioritising plastic cards over paper money and coins. A recent Reserve Bank survey found only 43 percent of us are still using cash regularly.

 

Source.

Cracks Developing in the Canadian Banking System Perhaps?

Back at the end of May we shared an interesting comment from the In Gold We Trust Report about Japan. They pointed out that the Japanese central bank was increasing interest rates at the same time as they were engaging in QE in the form of balance sheet expansion.

Well now we see the Bank of Canada (BoC) doing the opposite but also engaging in things that don’t usually go together. The BoC recently began cutting its key interest rate while they are still undergoing quantitative tightening i.e. removing some of the currency they previously created. Now they are also injecting emergency cash into the banking system:

“The Bank of Canada has restarted its overnight liquidity injections signaling the financial system requires additional capital to maintain interest rates at the 4.75% BoC target rate.

The BoC started Repo Operations with overnight cash injections of CAD $9.24B on July 17, 2024 that have now escalated to $16B on July 23.

At the same time that the BoC central bankers are injecting cash liquidity through the Repo facility, they are removing liquidity through their Quantitative Tightening (QT) program.

The BoC is pushing and pulling on the same liquidity rope.”

Source.

 

Who knows what exactly is going on behind the scenes here. But it is a sign that all is not well.

 

 

 

US Debt Hits $35 Trillion – Does it Matter?

There was a big focus on the high level of US debt this past week. Elon Musk pointing out that:

“America is headed for bankruptcy fyi”

When sharing a post which said:

“76% of all personal income tax last month went to servicing the $34 trillion national debt.”

Source.

 

In the few days since then US debt has actually hit $35 trillion.

ZeroHedge points out that:

“…under the last two presidents, US debt has increased by $15 trillion.”

Source.

 

So does this really matter? Back in 2015 economist Paul Krugman said that it doesn’t matter since “we owe it to ourselves”.

However we are more inclined to take notice of Tavi Costa who this week writes that the level of US debt may have a significant impact on the value of the US dollar. Because the US central bank will be forced to cut rates to ease the debt burden:

“According to the Organization for Economic Cooperation and Development (OECD), by next year the US will face by far the highest cost for servicing its debt among all developed market economies it tracks by next year.

This predicament has swiftly shifted from a long-term issue to an immediate challenge, and we believe it may force several reductions in the Fed funds rate that call into question the Fed’s ability to achieve its dual mandate of maximum employment and price stability.

Such a drastic reversal in policy stance by the Fed is likely to exert substantial downward pressure on the dollar relative to hard assets…

…the potential near-term benefits of cutting interest rates to ease the debt burden are tangible and achievable but also likely at odds with the Fed’s long-term goal of low inflation and full employment.

…Although currency markets behave on a relative basis, the pressing need for the US to adjust its interest rate policy indicates that the dollar is likely to face adverse effects from these potential changes in monetary and fiscal stance.”

To summaries his overall theory:

“We anticipate that, following the chain reaction from entrenched inflation to rising interest rates and falling sovereign debt prices, the US dollar will likely be the next to decline, driving precious metals significantly higher.”

You can read the full report from Tavi’s Crescat Capital here.  Or a trimmed down version on X/Tritter here.

Back here in NZ, the talk is growing that our central bank is also facing pressure to cut interest rates. Although in NZ’s case it is not to ease the burden upon government debt, but rather to provide some relief to what is a very struggling economy.

The Pressure For RBNZ Rate Cuts Is Mounting, As Rates Markets Collapse

• Kiwi wholesale interest rates have collapsed. Traders, many of them offshore, are placing massive bets on RBNZ easing, as early as August.
• We agree with market sentiment. Because we see the need for rates relief now, not later. If we were setting policy, we would have cut already. But for August, we’d cut 25bps, and signal 25bps at every meeting thereafter. And we’d highlight the potential use of 50bp moves, data dependent.
• At this stage, we don’t see the RBNZ buckling fast enough to do what’s needed (yet). Even though we think they should cut, we think it’s a step too far for the RBNZ. Following May’s massive misstep, August will be a complete about face, leaving many within the RBNZ with sprained ankles. We think they will lower all their forecasts and signal rate cuts by year end, rather than late 2025.

Source.

 

This is all pretty much going the way we expect. Central bankers will think (or at least say) they now have inflation “under control”, so they’ll start cutting rates sharply. Thereby ushering in the next wave of inflation that will “take them by surprise”.

However when we hear central bankers talk about how they have got inflation under control, it’s important to remember this is only comparing now to the same time a year ago.

“This is FAR more important than the inflation rate-of-change being “back down to 2%”

Since 2020, Americans have lost more than 25 percent of their wealth valued in USD

Source.