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Friday, July 19, 2024

All Roads Lead to More Inflation

(Mike Gleason, Money Metals News Service) Amid a grim new forecast for the national debt, precious metals markets have been volatile recently.

The gold market found support at the $2,300 level last week and has remained well above that level for days.

Turning to silver, a big move on Thursday saw prices move solidly back above the $30 level, only to fall back sharply again today.

It’s not yet clear whether the metals are going to embark on a summer rally from here or get pushed back at overhead resistance levels. What is clear is that metals stand to appreciate further over time against depreciating fiat currency.

Although inflation pressures have eased slightly over the past two years, there has been no improvement in the federal government’s financial condition over that period. In fact, the fiscal outlook has only worsened.

This week, the Congressional Budget Office projected that this year’s budget deficit will be much larger than previously forecast. The bad news was summed up by The National Desk News.

National Desk News Report: 

The national debt continues to head in the wrong direction and at an accelerated pace. On Tuesday, the Congressional Budget Office released an updated report predicting the debt clock will hit and surpass the $56 trillion mark by 2034. At the moment, the debt remains just under $35 trillion. This comes as the U.S. continues to spend more money than it collects in taxes.

Sen. Mitt Romney: 

Continuing to spend massively more than we take in and add every year massively to the national debt will not go on forever, and unless we deal with it in a constructive way, we will have a financial catastrophe at some point. National Desk News Report: For 2024, the CBO predicts the U.S. will spend $1.9 trillion more than it brings in. That’s up from the initially predicted $1.6 trillion.

The disturbing new numbers put the lie to boasts by the Biden administration of deficit reduction. President Joe Biden and Treasury Secretary Janet Yellen have repeatedly stated that at various times they have pushed through $1 trillion or as much as $3 trillion in deficit reductions.

But the CBO’s latest report lays bare that Biden administration spending priorities are the biggest drivers of deficit increases. For example, Joe Biden’s massive student loan forgiveness scheme, if fully implemented, will add $145 billion to the deficit.

All this comes at a time when federal revenues are actually up 5%. The previously enacted Trump tax cuts have arguably helped boost the tax base. The ballooning stock market has produced a windfall of capital gains revenue for Uncle Sam.

In any event, the government doesn’t suffer from a lack of funding. Its fiscal health suffers from a chronic excess of spending.

The spending problem won’t be fixed by raising taxes on the rich or by hiring another 10,000, 100,000, or 1 million new IRS agents to try to extract more revenue from the middle class. The deficits will persist, and the nation’s long-term fiscal outlook will continue to worsen until politicians in Washington admit they have a spending problem.

Of course, there is plenty of bipartisan blame to go around. Congress along with previous administrations have also failed to restrain discretionary outlays and have failed to put entitlement programs on a fiscally sustainable path.

But the situation is getting especially dire now given surging borrowing costs. For the first time in history, interest payments on the national debt will cost taxpayers over $1 trillion in a single year.

There is no politically viable solution in sight to the nation’s fiscal woes.

While the Biden administration continues to make up stories about deficit reduction, some Big Government proponents are openly admitting that the current system of borrowing and spending is untenable.

They want to be able to spend money they don’t have without having to borrow it into existence with interest obligations attached. They want the government to be able to cancel its own debt and go on to spend in unlimited quantities by simply creating new currency out of thin air.

Of course, this would be a recipe for hyperinflation. But similar results can be achieved under our current monetary system. The Federal Reserve can buy government bonds in unlimited quantities, thus giving the Treasury Department the capacity to continue borrowing in unlimited quantities.

The Fed’s implicit guarantee to prevent the government from defaulting is why politicians in Washington, D.C. don’t feel compelled to change their spending habits.

And it’s why currency depreciation – also known as inflation – is on track to become an even bigger problem in the years ahead.


Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 500,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government, and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales, and logistics, as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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