Lots of people are comparing today’s gold market to the 1970’s. Gold shot up to nearly $200 per ounce and crashed 9 months later to near $100 an ounce. Of course, gold had an historic rise to $850 per ounce after that wicked pull-back. Some, such as economist Nouriel Roubini, say “the gold rush is over,” and the seventies are not going to repeat. The debt of today is greater by orders of magnitude from the 1970’s, and there is no end in sight. That means gold has only one way to go (in the long term) and that’s up.
We had a national debt of less than $1 trillion when Jimmy Carter left office. Today, it is nearly $17 trillion, and the so-called debt ceiling is going to need to be raised – again. Debt in the U.S government is exploding. So is debt in the rest of the Western World, just look at Europe and Japan.
Derivatives were virtually nonexistent back the 1970’s. Today, the official total of these debt bets is around $700 trillion, and some say it’s more than twice that much. Pensions didn’t have funding problems back then. Today, they are at least $1 trillion dollars in the red. You can say the same thing for student debt – also $1 trillion in the hole.
There are more than $12 trillion paper dollar assets (stocks, bonds and cash) held by foreigners outside the U.S. Meaning, you couldn’t control the selling in a panic. In the 1970’s, the U.S. was a creditor nation. Today, it is the world’s biggest debtor. The U.S. credit was stellar in the 1970’s. Today, it has already suffered its first ever downgrade, and ratings agencies are threatening more.
The manufacturing base was intact back then. Today, it’s been gutted and moved overseas. That is a real wealth generator, and there is no easy way to get that back quickly.
Although some states are better off than they were a few years ago, others such as New York, New Jersey and California are still $1 trillion in the red, combined. We had spending for the Vietnam War, but that pales in comparison to the money printing of QE. The Fed pumped out more than $16 trillion after the 2008 meltdown alone, and it is still pumping $85 billion out each and every month to prop up the economy. This action is what the Fed calls “open-ended.” Some say its QE to infinity because if and when it stops, the market will crash and interest rates will spike. Trillions of new dollars have been created and nothing is fixed. The problem is still so bad the government allows phony accounting. It has done so since 2009.