The main reason to buy gold and silver is to protect against currency debasement, which is brought on by massive deficit spending that requires the Fed to print dollars to cover debt that could not be sold to private investors.
If all the Treasury’s debt we sold to private parties, that would not result in currency debasement and would not result in inflation; however, private parties are not buying all the Treasury’s debt, which is rarely reported by mainstream media.
In 2015, the official debt rose $851 billion to $18.99 trillion, which puts the national debt at 100% of Gross Domestic Product. That ratio is high by all measures, except compared to Japan’s, which stands at 249%.
Consequently, defenders of deficit spending like to point to Japan’s numbers and conclude that we’re healthy. If two cars are going of a cliff, it doesn’t matter which one goes first. Both are going to crash.
But, is the official debt of now $19 trillion a real measure of US Treasury liabilities? According to many studies, the federal government’s off-balance sheet liabilities, which includes funds not yet set aside for such as the guaranteed retirements for military personnel, deposit insurance, loan guarantees, etc., stands somewhere north $100 trillion.
That is a debt that can only be paid by printing still more money.
Historically, governments never repay debt. They either default–flat out not pay it–or they print to pay their debt, giving debt holders money that has been debased and has significantly less purchasing power. When too much money is printed, hyperinflation sets in.
During Zimbabwe’s recent printing binge, the cost of an egg went to Z$1 trillion. History is replete with other examples of government printing presses out of control, and the stage is set for massive money creation around the world as all large countries have adopted Keynesian economics.
Japan is increasing it’s quantitative easing program; Mario Draghi, the ECB’s head, is promising still more QE starting next month. China is loosening its monetary policies. Now, there is speculation that the Fed will back away from raising interest rates in 2016.
If the Fed doesn’t back away and still raises rates to save face, it will probably go with another form of quantitative easing. Although many analysts are saying that the slowdown in China is responsible for the worst stock market start ever, down 8% so far this year, other analysts are saying that the Fed’s position on interest rates share a big blame for stocks declining.