A shocking new report on real US debt levels is making the rounds today. Here’s what it means for gold & silver…
EDITOR’S NOTE: If you have first read this article before 7:00 p.m. EST on Monday, September 9th, 2019, it is worth reading again because it has been updated to address an email received in regards to the “liberal” use of the full 2000% of GDP “real debt levels” to calculate the gold (and silver) price. For the record, Half Dollar is not affiliated with any political party, nor is he affiliated with the unaffiliated, which is affiliation in-and-of itself.
An article garnering much attention in the mainstream media today is really a shocker.
Real US debt levels could be 2,000% of GDP!
I’ve done the math, using $20 Trillion in GDP, which is close enough to the US government’s “estimate” for 2018, and 2,000% of $20 trillion comes out to four-hundred million-million dollars in debt.
A “debt reform advocate” says we need to tackle the debt issue before the next recession.
How exactly are we going to do that?
That’s not even the real question.
The real question would be, does anybody really think our current “leadership” in Washington DC has any plans to tackle anything other than conquering the American People, let alone the debt?
Let’s see what’s in the works in Washington, using an example from “both sides of the isle” (if you can believe that nonsense):
- Creation of the US Space Force to fight aliens in outer space.
- Free money, healthcare, education, unicorns and rainbows for all.
It seems to me like we’re looking to make the debt levels 20,000% of GDP and not to “tackle the issue”.
But I digress.
More on the shocking story, from CNBC:
Total potential debt for the U.S. by one all-encompassing measure is running close to 2,000% of GDP, according to an analysis that suggests danger but also cautions against reading too much into the level.
AB Bernstein came up with the calculation — 1,832%, to be exact — by including not only traditional levels of public debt like bonds but also financial debt and all its complexities as well as future obligations for so-called entitlement programs like Social Security, Medicare and public pensions.
Putting all that together paints a daunting picture but one that requires nuance to understand. Paramount is realizing that not all of the debt obligations are set in stone, and it’s important to know where the leeway is, particularly in the government programs that can be changed either by legislation or accounting.
In its calculations, AB Bernstein pulls in debt from a variety of sources and compares it to GDP as follows:
100% of GDP using federal, state and local government debt combined.
150% for households and firms
450% for financial debt, which carries “conceptual issues and risks,” namely that debt held by financial firms often represents potential in a worst-case scenario involving various derivative instruments that can carry high notional levels that are unlikely ever to be realized.
27% in trusts for social insurance programs.
484%, which values all the promises from current social insurance programs.
633%, which tallies up an “infinite horizon” of obligations for social programs, rather than just the traditional 75 years used in computations.
So let’s calculate a fair price for gold, but first, what is a fair price for gold?
Well, the fair price would be the dollar price needed to cancel out the debt, what some people call a “debt reset”, and that dollar price is found by dividing the outstanding debt by the number of ounces of gold held by the US government.
And I get it, so before receiving additional, “Half Dollar, you’re a certified first class idiot” emails at [email protected], yes, I’m using all of the debt, not just the Federal debt, but hey, this is just to prove a point.
Besides, people say, “we owe it to ourselves”, so if that’s the case, I’m really just showing the other side of that coin.
Food for thought, if I may.
Additionally, my numbers vary slightly and will be off somewhat from the exact number because I’m using $20 trillion for GDP, and 8,000 tons for US gold reserves, not in troy ounces, so thanks in advance for the creative leniency.
Everybody knows ‘Ol Half Dollar ain’t no dang mathematician!
So let’s leave the number crunching to Google:
There is a point here: $10,000 gold, $50,000 gold and $80,000 gold are not ridiculous numbers, but they’re gold prices that are indeed coming.
In fact, as you can see in the calculation above, a fair market value price for gold right now would be over $1.5 million dollars.
People smart enough to stack gold (and silver) are going to see some serious gains in purchasing power when this all goes down.
Because when the dust settles, that is how valuable gold (and silver) will be.
Furthermore, this price is only going up because governments around the world only know how to spend (i.e. borrow) more, and nations around the world will not go back to gold & silver until absolutely forced to do so because of torches and pitchforks in the streets, to put it lightly.
OK, “Hey Half Dollar, what does this mean for the silver price?”.
Let’s assume a gold-to-silver ratio of 16 because that’s not how I roll, but rather, that’s what has been the case for more of United States history than it has not been the case.
Therefore, we divide the needed gold price by 16.
Also courtesy of Google, I’m calculating a fair value silver price of $97,656.25/ounce.
Serious implications for the US dollar are coming down the pike, and pretty soon.
People laugh when I say “get ready for $35 bottles of ranch salad dressing”.
There will be no laughter when debt-based US dollars are vaporized.
There will only be more civil unrest, riots, chaos and violence.
Gold, silver & skills are needed to survive what is coming.
Even with those things, survival isn’t guaranteed at all.
That’s just so a person can have a fighting chance.
On the other side, however, there is the rebuild.
That is what I am stacking for – the rebuild.
I am also stacking to protect my family.
And because, well, the Constitution.
Requiring “gold and silver coin”.
A $1,562,500 gold price.
And $97,656.25 silver.
That’s true fair value.
In the here & now.
That’s a steal.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.