It can be expected in President Obama’s second term Republicans in the House of Representatives will resist tax hikes. Democrats in the Senate will resist reduction in government spending. The result will be continued large trillion dollar deficits.
Currently the U.S. government annually spends approximately $3.5 trillion and receives revenue of $2.4 trillion. This results in deficits of $1.1 trillion. The current federal debt is $16 trillion, which is larger than our annual GDP of $15.4 trillion. U.S. unfunded liabilities for Medicare is $84 trillion and $21 trillion for prescription drugs.
The National Debt has now increased more during President Obama’s first term than it did during 8 years of the George W. Bush presidency. The Federal Reserve has targeted a 2 percent inflation rate, which means the U.S. dollar will lose 33 percent of its value over the next 20 years. Since going off the gold backed dollar, a dollar worth 100 cents in 1970 is now valued at 18 cents. The value of all the gold in the world is valued at $8.7 trillion dollars, but the unfunded liabilities of the U.S. government is $121 trillion.
As Governor Romney stated in the presidential debates, 47 percent of Americans pay no income taxes. 15 percent receive food stamps and 49 percent of the population live in a household where at least one member receive some type of government benefit. 58% of the money spent by the federal government in October and November come from barrowed money.
Albert Einstein is attributed to the quote that, “insanity is repeating the same experiment over and over and expecting a different outcome“. Historically, the outcome of unchecked government spending, with large deficits, and monetization of debt, results in hyperinflation and debasement in currency.
It does not take a rocket scientist to figure out that gold and silver will be a safer investment during President Obama’s second term in office than the U.S. dollar. The coming battle over the extension of the debt ceiling, reducing government spending, entitlement reform, increased taxes and increased business regulation, will be a significant head wind against the U.S. stock market. The U.S. stock market will also be impacted by a possible break-up of the Euro in 2013. Exchange traded funds (ETF) which invest directly in gold or silver should protect from debasement of the U.S. currency and as a safe haven from financial uncertainty. Declaimer, I am currently long gold and silver ETFs.
For an analysis of the current culture war in the United States go to:
Youtube: Stephen Johnston “Tea Party Culture War”
