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Gold Deficits, Fort Knox, and a Reset Everyone knows that government expenses and deficits are out of control. Think U.S., Europe, the U.K., Japan, and others. So what?
Everyone knows that the U.S. officially holds a massive supply of gold in the Fort Knox Bullion Depository – about 147,000,000 ounces of gold. It hasn’t been audited in 60+ years, but let’s pretend it still exists. To put the debt, deficits and craziness into perspective, compare debt and deficits to ounces of gold and to the gold officially vaulted in Fort Knox. First: Examine the official U.S. national debt (in $ millions) on a log scale since 1970. The exponential trend is evident. Note that the national debt has gone up from under $400 billion to nearly $19 Trillion – $19,000 Billion. Second: Take the INCREASE in the national debt each year and divide by the average price of gold that year. The graph shows the INCREASE in the national debt each year measured in gold ounces. Note that the average increase in the debt was about 710,000,000 ounces of gold EACH year since 1970. Third: Remember that Fort Knox officially contains 147,341,858 ounces of gold. Define that as one FKGU – one Fort Knox gold unit. Now show the above graph in FKGU’s. How much did the US government increase its debt EACH year since 1970 by the equivalent value of all the gold in Fort Knox? Note that the average for EACH year since 1970 was about 4.8 FKGU. Repeat: The US government INCREASED the official national debt by the “value” of all the gold in Fort Knox about 4.8 times EACH year since 1970. Unsustainable! Fourth: Now add up the national debt increases in FKGU’s since 1970. This shows the total official national debt, in FKGU’s, as it has been accumulated since 1970. Note that the accumulated national debt, valued year by year in total official Fort Knox Gold Units, now exceeds 220. Repeat: The official debt of the U.S. government, measured each year in the total “value” of all the gold officially vaulted in Fort Knox, would have spent the Fort Knox gold over 220 times. Unsustainable – this is not a viable system. Really? The U.S. (and other countries) is so deeply in debt that the accumulated year by year deficits would have spent the entire hoard of Fort Knox Gold over 220 times. This suggests:
CHOICES? What will the Fed do? Per John Rubino:
CHOICES? More QE, “bond monetization,” bail-ins, pension fund confiscations, higher taxes, helicopter money, tax rebates, who knows? In essence – “a new deal” that tries to bail out and extend the corrupt system at the expense of … guess who? There will be substantial trauma. As Charles Hugh Smith says, “Virtually every major program of every major nation-state is financially unsustainable going forward.” Financial triage, along with most government programs, will fail, so expect considerable trauma in 2016 – 2020.
Gary Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites such as 321gold.com, peakprosperity.com, goldseek.com, dollarcollapse.com, brotherjohnf.com, and many others. Many years ago he did graduate work in physics (all but dissertation), so he strongly believes in analysis, objective facts, and rational decisions based on hard data.
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