December 16, 2022
In 2022, the Fed has raised interest rates seven times to a range of 4.25% to 4.5%, its highest level since 2007. The rate has increased from practically zero (0.08%) at the start of the year. This week, the expected terminal rate was put at 5.1%, to occur in mid-year 2023.
When Fed Chairman Volcker raised the policy rate to 20% in 1980, the US Treasury debt was around $900 billion. America was the wealthiest nation in the world by a large margin. The total tax receipts of the Treasury were $344 billion. So debt to income was 2.6 times, or as the bankers like to say, income to debt was roughly 38%, a little more than the equity they want you to have as a minimum in your home. In 1980, the US current account with other countries was in surplus, and most of the Treasury debt was held by Americans who enjoyed the income.
At the start of this week (Dec. 12), the national (Treasury) debt was over 27 times higher than in 1980, $24,484,165,270,687.53 to the penny. Most of that debt is held abroad, and by the Fed, so non-Americans enjoy most interest payments from the Treasury. In 2022, revenue collected by the US government from Americans was $4.90 trillion, and expenditures, including a large amount sent abroad, were $6.27 trillion, so there was a deficit of $1.37 trillion. America’s wealth has been turned into debt.
So, here’s the problem with the Fed hikes. Every one percent rise in interest rates would add about $245 billion in interest payments. The five percent hike will add at least $1.2 trillion this year, more next year, and the year after that. Since there is already a deficit and the national debt continues to grow, who will pay? Who benefits?
Today Congress agreed to a deal to keep the government open for another week. Next week, they say that a 2023 agreement will be discussed. At what point does the average American admit that (1) the US Dollar is not worth holding because there is no legitimate backing from the government, and (2) that Gold and Silver are the assets that people worldwide have turned to for thousands of years in these situations?
The fearmongers have been having a field day with their market crash scenarios. I am not a fearmonger. I’m telling you facts and giving you a reason to invest in Gold and Silver.