By Sean Kelly
What would you do if you had a mountain of debt?
Maybe you threw a lot of money at people hoping they would like you. Maybe you gave expensive gifts to your bankers and other influential people. Maybe you spent on high-price activities in far-flung places. Maybe you did things that tanked your income.
Those might be some of the reasons for your mountain of debt. You can probably come up with others. In any case, it’s a formidable mountain, one that has been growing for years. It is much bigger than anything you can ever hope to pay.
Now you are in a fix.
But since we are making this up, let us imagine one more thing. Suppose you also have a license to print money.
What would you do?
It’s probably inevitable that you would print money to pay off your debt. And with that, we’re back in the real world. Because that is exactly what governments in the real world do time after time. When they find themselves with a mountain of debt they print money to pay it off.
They do not always want to, because there are usually grim consequences for printing all that money. Sometimes governments collapse, politicians are ushered to the guillotine, revolutions get started, societies break down, the money ends up worthless, and commerce grinds to a halt.
Still, it has happened more times that we can count.
A dozen years ago Zimbabwe printed its currency in denominations of 100 trillion dollars.
In 1946 Hungary issued banknotes denominated in 100 quintillion of its currency units. Germany in the 1920s ran 2,000 printing presses day and night to crank out the cash. Last time we looked, the inflation rate percentage in Venezuela was measured in the millions.
Much the same thing has happened here in America, too.
The colonists rebelling against England printed wagonloads of Continental dollars, which became worthless. By the way, the British knew just how destructive printing-press money is, so to help undermine the American rebels they counterfeited and printed even more of the Continentals.
During the Civil War, Washington turned to printing unbacked money, the infamous “greenback dollars.”
When debts become unmanageable, those with a license to print money do just that. They print.
So just to review, US debt is now $27 trillion dollars. Just since the first of the year, the Federal Reserve has printed (digitally, but it’s the same thing) more than $3 trillion.
We think you should take a good, long look at this chart which illustrates our point. Although we made this chart this week using the Federal Reserve’s own tools, it doesn’t quite tell the whole story. It shows federal debt, the red line, of $22.7 trillion. But that was last year. Today the debt is over $27 trillion. It is more than $4 trillion higher than shown here.
It is literally off the chart!
The green line, the one that turned straight up this year, represents Fed money printing. The Fed had to print that money, as we said more than $3 trillion dollars, just to help keep Washington’s bills paid.
So that is where we are.
Last summer we wrote a piece (HERE) noting that Bank of America was raising its gold price target to $3,000. The bank titled its report “The Fed Can’t Print Gold!”
By the way, at the same time BofA raised its gold target, is also called for silver to reach $50 an ounce in the medium term. Now the resource team at Citibank has weighed in on the subject, writing, ““We expect that investor demand for precious metals exposure will remain high during 2021 as pressure on governments to devalue currencies, concerns about vaccine efficacy and take-up rates and questions over equity and bond valuations and rising global debt remain in most scenarios.”
Citi calls $50 silver a “very realistic target,” and $100 an ounce “possible.”
After all, the Fed can’t print silver either.