Examine the picture below. The global economy thrives on debt and credit. We purchase essential products using debt/credit. The U.S. dollar bill is a debt of the Federal Reserve. All debt based assets have counter-party risk.
The St. Louis Federal Reserve publishes data on “Total Debt Securities” in $ millions. Note the rapid rise since 1971 after President Nixon encouraged rapid devaluation of the dollar.
Yes, the total U.S. increases debt rapidly – about 9% per year on average since 1971. A graph of U.S. national debt looks similar and shows about the same rate of increase.
Gold bullion and coins are NOT debt and have no counter-party risk, in contrast to debt based assets. But who cares about gold?
- Central banks profess little interest in gold, although they own a substantial quantity.
- Wall Street makes little profit from gold – no interest there.
- The middle class struggles to pay debts and shows little awareness of gold. (A change in attitude is coming!)