Government fiscal policy – profligate spending, leading to debt crisis, leading to currency crisis, leading to…the fall of the U.S. dollar – is the major cataclysmic endgame that is going to befall the U.S.
So says Laurynas Vegys (caseyresearch.com) in edited excerpts from the original article* entitled A Crisis vs. THE Crisis: Keep Your Eye on the Ball.
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (sample here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Vegys goes on to say in further edited excerpts:
Major financial, economic, or political trends…don’t normally appear as full-fledged disasters overnight. In fact, quite the opposite; they tend to lurk, linger, and brew in stealth mode until a boiling point is finally reached, and then they erupt into full-blown crises (to the surprise and detriment of the unprepared).
Fortunately, the signs are always there for those with the courage and independence of mind to take heed and they are telling us…that the real ball we need to keep our eyes upon is our government’s fiscal policy of profligate spending, leading to debt crisis, leading to currency crisis, leading to…the fall of the US dollar.
The first parts of this progression are already in place. Consider this long-term chart of U.S. debt.
Notice that government debt was practically nonexistent halfway through the 20th century, but has seen a dramatic increase with the expansion of federal government spending.
Consider this astounding fact: The government has accumulated more debt during the Obama administration than it did from the time George Washington took office to Bill Clinton’s election in 1992. Total US government debt at the end of 2013 exceeded $16 trillion.
Let’s put that in perspective, since today’s dollars don’t buy what a nickel did a hundred years ago.
Except for the period of World War II and its immediate aftermath, never before has the U.S. government been this deep in debt. Having recently surpassed the threshold of 100% debt to GDP, America has crossed into uncharted territory, bringing itself in-line with the likes of:
- Japan, “leading” the world with a 242% debt to GDP ratio
- Greece: 174%
- Italy: 133%
- Portugal: 125%
- Ireland: 117%
The projection in the chart above is based on the 9.4% average annual rate of debt-to-GDP growth since the U.S. embarked on its current course in response to the crash of 2008. If the rate persists, the U.S. will be deeper in debt relative to its GDP than Ireland next year, deeper than Portugal in 2016, Italy in 2017, Greece in 2019, and even Japan in 2023 (and the US does not have the advantage of decades of trade surpluses Japan had).
Granted, the politicians and bureaucrats say they will slow this runaway train, but we’re not talking about Fed tapering here. Congress will have to embrace the pain of living within its means. We’ll believe that when we see it.
Let’s take a more conservative, 10-year average growth rate (an arbitrary standard many analysts use): 5.3%. At this rate, the US will still be deeper in debt than Ireland and Portugal in 2017, Italy in 2019, Greece in 2024, and Japan in 2030.
Either way, this is still THE crisis of our times; all of the countries mentioned above are undergoing excruciating economic and social pain. It’s no stretch to imagine the kind of social and political turmoil that has resulted from the European debt crisis coming to Main Street USA, as American debt goes off the charts.
It’s also important to understand that the debt charted above excludes state and local debt, as well as the unfunded liabilities of social entitlement programs like Social Security and Medicare.
This ever-growing mountain—volcano—of government debt is long-term, systemic, and extremely difficult to alter trend…It’s here to stay for the foreseeable future. While some investors have grown accustomed to this government-created phenomenon and no longer regard it as dangerous as outright military conflict, make no mistake—in the mid- to long-term, it’s just as dangerous to your wealth and standard of living.
Protecting yourself from this crisis is simple: convert as much government currency units as you can into real money: gold.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
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