Ignoring Economic Reality: Ayn Rand Would Laugh

May 30, 2018

We can ignore reality, but we cannot ignore the consequences of ignoring reality.” Ayn Rand.

This article was written for Miles Franklin by Gary Christenson.

The western world has ignored economic realities for decades. It’s not a Republican or Democratic problem. Banking, power, fiat currencies, dishonest money and transfers of wealth are the issues.

The consequences of ignoring reality are uncomfortable and dangerous. However, most people prefer palatable, easy to digest and believable stories.

In the United States, the U.K., Europe, and Japan it is comforting to believe:

  • Debt has increased exponentially for decades and for over 100 years in the US. We want to believe debt will grow for another century. (It won’t.)

  • Governments want to borrow, spend their way into prosperity, and pretend and extend indefinitely. (Not likely.)

  • It is comforting to believe our politicians and central bankers manage our countries and currencies for the benefit of the populace. (Don’t plan on it.)

  • Every major country uses a central bank. It is comforting to believe central banks are necessary. That delusion benefits the banking cartel and the political and financial elite.

  • It is comforting to believe gold is not necessary. Per Warren Buffett, we dig it from the ground and store it in a vault. Russians and Asians know its value and always want more.

  • It is comforting to believe in paper assets, debt based assets, fairy tales and the Easter Bunny. Gold, silver, platinum, land, and other real assets survive. Gold thrives, paper dies.

These comforting beliefs are incorrect and will be proven false in coming years.

The U.S. national debt has increased from about $3 billion in 1913 to over $21,000 billion ($21 trillion) in 2018. That is an average annual increase of about 8.8% per year. A similar debt increase for another 100 years will exceed $90,000 Trillion. Delusion!

  1. The crisis of 2008 hinted that “peak debt” had arrived. The Fed and other central banks responded by creating more debt and took credit for saving global economies. More debt is not a solution. The coming implosion will be destructive.

  2. Place one penny in a savings account at 6% annual interest and allow it to grow for 1,000 years. Your $0.01 has grown to a few hundred bucks—right? No! It has grown to $202,000,000,000,000,000,000,000. (Yes, the math is correct.)

  3. Compound interest rapidly increases debt. Debt will not increase forever and a reckoning will occur. What is the value of a 30 year bond yielding 3%, issued by an insolvent government that cannot pay the interest without going deeper into debt?

CONSIDER

  • Central Banks: Central banks and commercial banks produce paper and digital currency units that devalue all existing currency units. Central banks create profit for their owners and the financial and political elite. They are not beneficial for most people and small businesses.

  • Gold: The western financial and political elite claim gold is mostly useless. However gold has been money for thousands of years, is valued globally, and is convertible into paper and digital cash everywhere. An ounce of gold sold for about $42 in 1971 and sells for about $1,330 in March 2018 – a compounded annual increase of 7.6%.

  • Debt: The debt pyramid will crash and bonds and currencies will decline toward intrinsic value. Central banks will create more currency units to “paper over” the crisis and gold will increase in price as dollars devalue.

Ignoring Reality And The Consequences

We can ignore reality but we cannot ignore the consequences of ignoring reality.” The consequences are:

  • U.S. government spending and national debt growth are “out-of-control.” Expect continual dollar devaluation.

  • Based on Fed policies and government actions, the Fed can save either the dollar’s purchasing power or the bond market. Pick one!

  • Because an imploding bond market will destroy credit and the economy, expect the Fed to sacrifice the dollar, not the bond market.

  • However, the Fed and the U.S. government may kill all three – the stock market, bond market and dollar – in their delusional efforts to project military power and protect the banking cartel.

  • Gold and silver prices must increase as all fiat currencies devalue. Another country might back their currency with gold to prevent further devaluation. It won’t be the United States.

  • The cumulative damage from past economic delusions increases gold prices. The western financial world should be worried. Trouble, trauma, and a reckoning lie ahead.

  • Confidence in the dollar affects gold prices. When the dollar plummets, gold prices at $3,000, $5,000 and $10,000 will be sensible.

Which will have more purchasing power in ten years?

  • An ounce of gold or 14 one-hundred dollar bills?

  • An ounce of silver or a politician’s promise?

  • A ten year note for $10,000 purchased in 2018 that yields less than 3%, or 7 ounces of gold?

Call Miles Franklin at 1-800-822-8080 or WhyNotGold at 1-888-966-8465 to purchase real metals that will survive the coming debt-based asset implosion. History will not repeat, but many examples show that the purchasing power of gold will thrive while unbacked paper currencies will not.

Gary Christenson

Gary ChristensonGary 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.

Palladium, platinum and silver are the most common substitutes for gold that closely retain its desired properties.