Article by Colonel Nogov on Feb. 6, 2015
This is a follow up to GDP doesn’t measure economic growth. I claimed there that I thought the economy had negative growth for most of the last 30 to 40 years. Here are a couple of charts.
This is a chart of the personal savings rates in the U.S. since 1971. It’s a steady decline. U.S. citizens have been spending their savings and borrowing to consume. Just as I speculated in the article.
This is the 10 year bond yield since 1971. It’s been steadily declining for 30 plus years. This is how the government gets the people to spend their savings. It lowers interest rates as a disincentive to save. It also encourages borrowing since the cost of borrowing is lower due to lower interest rates.
Government bond yields can’t go any lower without becoming negative after accounting for inflation. Right now they are effectively at zero once accounted for inflation. I believe they’re actually negative because the government is lying about inflation. Bonds have nowhere to go but down (price). price and yields move in opposite directions. As the yield goes down, the price goes up. The yields can’t go down farther without going negative, so the price can’t go up any farther. What’s that mean? Sell bonds!
The U.S. government is bankrupt it just hasn’t stopped paying it’s bills yet. It can still borrow, actually print money to pay it’s bills. It’s about to default. It will default in one of two ways. It stops paying its bills or it prints money to pay its bills. Printing money to pay its bills will be hyperinflation which is essentially the same because it will technically be paying its bills, but the currency will be worthless.
When I say it’s going to stop paying its bills, I mean things like social security, government employee paychecks, government pensions, government bonds, food stamps, welfare, contractors.
Back in the early 80’s, Paul Volcker advised the government to raise interests rates to save the economy and the government. Couldn’t the government just do that again? No! This time it’s at the end of its rope. It has too much debt. Just a small rise in interests rates will cause the government to spend all of its tax revenues just on interest payments. It would not have any money left to pay the bills as mentioned above.
My advise is to buy physical gold(and silver) and keep it in your possession.
Here is a chart courtesy of zerohedge.com that shows how much gold countries have relative to their outstanding base currency. The U.S., if we even believe they have the amount of gold they say they have, only has roughly 8% in gold compared to the outstanding base currency. This doesn’t include the fractional reserve banking process which multiplies the amount of currency in circulation. (see fractional reserve banking info). The U.S. would need 12.5 times the amount of gold it currently has to cover the amount of base currency in circulation, or the price of gold would need to be 12.5 times what it is today.