The United States is Hosting a Debt Party—$2,000 Gold is Coming
The US has seen accelerated debt build-up since the early 1980s, before culminating in the financial crisis of 2008-2009.
You would think everyone would learn their lesson and ease off the gas, but the exact opposite has occurred. Debt levels are now at record highs, staving off GDP growth.
In 2014, debt overtook GDP for the first time since World War II. Unfortunately for the US, it is no longer the world’s only superpower. After WWII, the US was the beneficiary of having its infrastructure unscathed, and was essentially the world’s manufacturer. The baby boomers benefited immensely, with low tax rates and generous pensions.
Today it’s a different story. Extreme debt has slowed economic growth, and the world’s central banks are forced to print money to continue growing and servicing debt.
China’s economy grew faster than expected last year, but this was throttled by higher government spending and record levels of bank lending. China’s debt-to-GDP ratio is a staggering 277%, with increasing new credit being used to service debt. Japan’s debt-to-GDP has increased to 250%, the UK’s to 123%, and France’s to 122%.
What does this mean for gold? Since the end of Bretton Woods, gold has followed debt. We saw a period of divergence, but this was quickly rectified by a spike of 500% in the gold price.
Currently, there is another divergence, and another spike is in the works. While gold is already on the mend, the resulting rally could easily put it over $2,000 per ounce.
The world cannot fix its debt problems overnight. In the near future there is a sustained period of economic drought and gold price abundance.