Debt

Gold is in the middle of what looks like an unstoppable bull run. It has already punched through $4,000 an ounce. At the rate the price is rising, it may well go to $5,000 within a few weeks, and perhaps even $6,000 as the next year unfolds. There have been lots of different explanations for this, from the looming collapse of the dollar, to secret Chinese buying, to the conspiracy theories circulating on the wilder fringes of the internet, such a secret plot to re-establish the gold standard, or attempts to replace all the metal that is meant to be stored at Fort Knox, America’s official gold reserve, which apparently went missing decades ago. But the real explanation is very simple: it is the only way to hedge against soaring government debt.

Elon Musk rarely bites his tongue. Just ask the Treasury Secretary, who the tech billionaire branded a “Soros agent,” or the UK’s Prime Minister, who Musk accused of going soft on grooming gangs in January this year. But it seems the founder of the Department for Government Efficiency (DoGE) has been holding back a rather explosive opinion – one he could never share while he was popping in and out of the Oval Office, working for President Donald Trump. “I’m sorry, but I just can’t stand it anymore,” Musk wrote this afternoon on his platform X. “This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it.

By almost every historical indicator, the US is clearly approaching a debt crisis. The federal government’s aggregate liabilities now exceed its gross domestic product. The annual interest required to service federal obligations is greater than what Congress spends each year on defense. And projected annual deficits for the next decade are well ahead of estimated revenues by more than $2 trillion. Many state legislatures are deeply underwater as well, despite receiving generous Covid related bailouts from President Biden’s 2021 American Rescue Plan Act. California’s temporary $100 billion surplus in 2022, for example, has morphed into a projected deficit of $68 billion over the next two years.

It’s a familiar response whenever the National Weather Service warns of a Category 5 hurricane, a life-threatening winter blizzard or some other looming natural disaster. Government officials urge local citizens to seek shelter immediately, while promising that area police will keep guard to ensure that looters do not use the emergency to rob boarded-up homes and abandoned stores. Today, Americans are being warned to brace for another kind of storm, one involving not the weather but their personal finances.

With the current inflation rate still well above the Federal Reserve’s 2.0 percent target, it is only natural that critics of President Biden’s Inflation Reduction Act (IRA) treated its recent one-year anniversary as an opportunity to once again stress that the bill never had anything to do with inflation. Biden himself has finally admitted as much. But what has received almost no attention is the degree to which big spending programs like the IRA — whose estimated cost has already spiraled up from $384.9 billion to $1.5 trillion — will further erode America’s social safety net. Especially the Medicare hospital insurance fund (Medicare Part A), which its trustees say will be depleted in 2031, and Social Security, which runs out of money just three years later, in 2034.

Wealth comes from ownership. Being involved in the financial industry for nearly thirty years, and spending the past dozen-plus years in the media helping people create economic freedom and wealth for themselves and their families, I know that wealth being derived from ownership is an indisputable truth. More concretely, wealth comes from the ownership of assets that increase in value over time. Ownership is a subject people tend to greatly misunderstand. We misconstrue where wealth comes from, and we misinterpret the benefits of hard work and taking risks. You can meet a poor construction worker putting in eighty hours a week for someone else. You can find professional athletes declaring bankruptcy as soon as their multimillion-dollar contracts end.