Red Ink!

Your National Debt Update!

One way to foresee the trajectory of the gold price is to simply track the flood of US Government red ink.

It’s serious!

Let’s start at the beginning by defining two essential terms: the federal debt and the deficit.

The federal debt is the gross debt of the US government.  It grows year after year.  The deficit is the difference between the government income and spending in each specific fiscal or accounting year.  So if the deficit is a trillion dollars, the gross debt of the government will increase by a trillion dollars.

April ended seven months of the US fiscal year 2025.  The national debt is $36.2 trillion.  One year ago the national debt was $34.6 trillion.  That means that so far this fiscal year Washington has run a $1.6 trillion shortfall.

That means for the full year the deficit is sure to be at least $2 trillion.  

Let me put that in perspective. The entire federal debt of the US government did not reach $1 trillion until 1982.  I don’t mean the one-year spending deficit. I mean that the entire debt of the US government didn’t reach $1 trillion until 1982.  

The US fought for and gained its independence; it fought the British again; it completed the Louisiana Purchase, fought the Civil War, purchased Alaska, opened the West and expanded to the Pacific coast;  it fought World War One, World War Two, the Korean War and the Vietnam War, and put a man on the moon.  And through all of that, the cumulative federal debt didn’t reach a trillion dollars.  

Until 1982.

But in just seven months of the current fiscal the deficit was $1.6 trillion!  

For just seven months!

Maybe you see where this is going.

The debt is equal to approximately $323,000 per US taxpayer.

No wonder the gold market keeps moving higher.  The gold price is the price of one ounce of gold in US dollars.  But the dollars buy less and less gold and less of other things with each passing year.  That’s because the US government has more debt than it can afford to service.  It will have to print a lot more dollars to pay its bills.  And each of those new dollars will take on value to the extent that existing dollars lose value.

They don’t say it out loud, but here’s what Washington is thinking:  “If the people aren’t concerned with the debt we’re loading on them, why should we be?  If they don’t realize we’re going to print money and inflate away their earnings and savings, then let’s just keep the party going.”  

So, gold has climbed as high as $3,500 and continues to consolidate in that neighborhood.  Don’t forget that that the dollar’s loss of purchasing power today and tomorrow is reflected in that price.    In fact, gold is now 100 times the official price it was when President Nixon severed the link between the dollar and gold.

We have a couple of thoughts about the turn of events.

First, we’re glad we still have some time to help our farsighted friends and clients invest in gold before the price really runs away.  We don’t know how long we have, but events are accelerating.  Please don’t wait until it is too late.

Finally, from our friend market commentator Micheal Shedlock:  “If you think either Congress will do anything about soaring deficits, then think again….”  

“If you think we are headed for a currency crisis, then you are thinking correctly.”