The dollar will be the last room in the house to be burned, and the people will eventually flee to precious metals. What we've seen over the years -- which has been a benefit for the U.S. -- is countries turning to the dollar as a safe haven for crisis and turmoil, but this will come to a screeching halt as the U.S. monetary system implodes on itself.
Currently, the national debt is at $18.2 trillion and growing exponentially. The deficit -- which is the yearly amount that is being added to the national debt -- is at around $500 billion, and is at risk of expanding dramatically. As of right now, the debt is beyond fixing, and the worst part about it is that it is only expected to balloon because of rising interest rates. Right now, interest rates are at historic lows, and any movement in the interest rates could absolutely decimate the financial state of the United States. As a result, a run on the dollar could realistically happen.
Consider this: as I said previously, the U.S. debt is currently around $18.2 trillion. For each percent hike that we are inevitably going to see, $180.2 billion of new interest payments will be placed on the government's plate as an obligation to service the debt holders. So if interest rates go up a mere 3%, that's a new $540 billion that will be added to yearly obligations, which would literally more than double the current deficit just like that. And keep in mind that when the debt goes up to $30 trillion dollars, one percent of $30 trillion will no longer be $180 billion, but $300 million. So as you can see, the situation can compound out of control. And when it does, the dollar will be the last major currency that goes bust before people exit the dollar for real assets, with gold and silver being a major beneficiary of this wealth transfer.
The dollar has benefitted from the rest of the world's debt problems, being the perceived safe haven, but the out of control debt and spending will ultimately burn down the dollar and cause people to get out of the collapsing house of countries and into real assets. Precious metals will be the escape route for those who are prudent and see the bigger picture. The reality is every country across the globe is facing out of control debt, and some have been led to the slaughterhouse because they have pegged themselves to the U.S. and are now finding themselves hung out to dry.
Things are Getting Bad Globally
We are seeing unprecedented actions taken by governments around the world, with central banks purchasing their own bonds. Recently, we have even seen some countries go beyond just a zero percent interest rate policy, taking their interest rates into the negative territory.
Some countries in Europe, such as Denmark, Sweden, and Switzerland have implemented negative interest rates, which is causing a number of unfathomable things to happen. Number one: people that are putting their money in banks are actually having to pay a fee to save. This is an extreme paradox, and something that makes no sense. Negative interest rates would incentivize people to spend their money instead of save it, but it could also be the catalyst for a run on banks and a massive dump of the country's currency. Central banks and governments are trying to address this issue with talks of things like abolishing physical cash and leaving people stuck in the banking system where they can be controlled. Another result of negative interest rates -- which is a brain teaser -- is that banks are having to pay borrowers money, who might be on adjustable rates because rates have gone from positive into the negative territory. Any bank with adjustable rate mortgages could actually owe money to the borrower in a negative interest rate environment. From a business standpoint, this is a total paradox.
So in these countries, going forward with negative interest rates, you earn money when you borrow and spend and lose money when you save – something I never thought could actually happen.
The global situation, as you can see, is out of control. The dominos of countries that are failing will continue to rush to flood the safe haven known as the dollar. The problems within the U.S. will inevitably implode, which will ultimately lead people back to hard assets and precious metals.
Look for my upcoming interview with Andy Hoffman, where we explore these realities to a much larger degree, which will be released over the weekend!