US Government Debt Keeps Mounting, Marking a New Step Towards Bankruptcy
The United States is advancing towards eventual bankruptcy and a decisive economic downturn. For this reason, buying gold remains the best way to protect one's wealth, said Yaron Brook speaking at Freedom Fest 2021.
Brook is a managing partner at BHZ Capital and author of numerous books on economics. He is also on the board of the Ayn Rand Institute and the host of the Yaron Brook Show.
According to Brook, the US government is pursuing a destructive course of action and will bear full responsibility for the future economic trouble. The sky-high debt can hardly be paid: the country is nearing the level of debt similar to what we experienced during WWII. However, back then, the US managed to accumulate a capital surplus right after the war ended and thus paid off the debt. Nowadays, nobody is going to accumulate capital in such a way, because it's impossible due to the current political standpoint, said Brook.
High debt together with the current tax and monetary policies result in high inflation in the absence of corresponding economic growth, also known as stagflation. However, hyperinflation is unlikely to happen in the US. A solution, according to Brook, would be to reduce the rate of state control over the economy and to discard the Federal Reserve.
If stagflation begins in earnest, investors will need to stay away from risk-on assets like stocks and long-term bonds. Brook recommends buying gold, since it can maintain its value over long periods of time. Gold is both an investment and a means to protect capital from depreciation.
Speaking of gold: as of the end of April 2021, US mines have yielded only 15.1 tons of gold. This is far lower than the annual peak reached in 1998, as reported by the US Geological Service (USGS).
Every year US facilities produce less and less gold. This can be observed in the monthly reports published by the USGC, though they tend to appear with a delay. The most recent report lists data for April, and the figures are lower compared to the preceding periods.
The report says that 15.1 tons of gold were mined in April, up slightly from the 14.9 tons in March. However, it's still 2% lower than in April 2020, when the Covid-19 restrictions were in full swing. Overall, US gold production between January and April 2021 reached 58.7 tons, down 5% year on year.
As in other gold-mining regions, most of the available gold in the US has been already extracted. The industry is facing a constant decreasing concentration of gold in the ore, and it's very rare to discover a promising new location for mining. Besides, the costs of mining and prospecting for gold have grown significantly in the past few years. It 's also worth noting that gold production in the US has been going down every year since 1998. For example, only 190 tons were mined in 2020, which is only half of the record volume recorded in 1998.
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