It’s not that often you use the word ‘guarantee’ and are right about it, but this could actually be one of those times.

Question: what do you get when you combine a debt- grounded financial system with soaring interest rates?

If debt levels keep rising, and the federal government has to pay interest on that debt, and they’re hiking the rate that affects how much they pay on that debt…

If debt situations are rising.

Well, you finish up with a poisonous financial blend that nearly guarantees further and further currency will have to be created to meet that obligation.

And you will presumably guess how gold is likely to respond to lesser and lesser currency dilution?

Here’s some new research you (most likely) haven't seen elsewhere…

How does one Spell Debt? U-N-S-U-S-T-A-I-N-A-B-L-E!

You ’ve seen debt charts before, but we would like to set the stage... And indeed I was surprised as well, when I saw the latest total public debt figure from the Fed’s website.

As you clearly can see, the rise in the fed public debt since 2000 has been implacable. It’s nothing in need of a parabolic rise.

Since just 2008, total debt owed by the fed government of the United States has grown a HUGE 224% meaning it’s more than tripled in 14 years. Heck, it’s up 15.5% just since Convid hit in March 2020.

It doesn’t take many brain cells to know that this isn’t sustainable.

And unless you think deficits will be zero going forward—deficits get automatically added to the debt—this figure is only going further north.

Now, some economists are trying to claim that “ we owe it to ourselves, ” inferring large debts are not a big problem... and occasionally it even “ feels ” like they could be right.

But that statement is not 100% accurate; when you have to pay bond holders interest on that debt, that’s relatively just paying ourselves. And with rates rising, that payment is getting bigger and larger.

Then it will look like this:

The Big Debt Squeeeeeze

The fed tracks the amount of interest they pay on their debt.

The latest update is sobering.

As you clearly can see, the volume of interest paid on US debt has spiked to new all-time highs. That spike on the far right of the map is a direct result of higher interest rates.

• In just the latest 12 months, interest paid on fed debt has jumped 22.7%

And this excludes the last Fed rate hike. And any hikes going forward.

This raises a natural question. Considering just interest payments on the debt

• How long can the central bank of the United States afford to continue to raise rates?.

To help answer that question, this study from the United States House of Representatives Committee on the Budget named The Consequences of Higher Interest Rates to the Federal Budget came to the following shocking conclusion:

“The 50-year average for interest rates on the Federal debt is 5.7%. If rates meet the 50-year average, interest payments on US debt would be $11 trillion per year, more than 100% of annual tax revenues.”

That $11 trillion figure is not a misprint.

How big is that?

Well, the Congressional Budget Office (CBO) systems that fed tax revenues are going to be roughly $6 trillion by 2045. Income from tax is the government’s primary source of income.

I dipute those two projections to another chart. Sure, this scenario is 23 years away, however, it doesn’t really look like a good future...

The FED gov would be paying 85% more in interest payments than their income, IF this scenario played out.

Yes, it's a projection, and yes perhaps interest rates don’t re-address to the 50-year average. But the direction is shocking because it’s obviously not ever doable.

In fact, it’s not doable now! We can’t balance the budget as it is. And this is only one of numerous payments the fed government has to make, the other big ones being healthcare, Social Security, education, welfare and defense.

How will the government meet its financial obligations?

Fed, Phone Home

The pressure on the financial system will increasingly grow. How will the fed government and politicians deal with this shortfall?

• Will they default on the debt?


• Would they consider a debt jubilee?


• How about a bailout by the IMF?

No American President would allow any of those options. and surely, a complete systemic collapse isn't an option.

The easiest and most advisable “solution” is to just create more currency.

Indeed, the history of the US central bank clearly shows this is the choice they will make — they ’ve done it many many times in the past.

And what asset can’t be published or digitized on a whim?

Gold supply grows roughly 1.5% per year. Imagine politicians being limited to spending increases of just 1.5% annually... that’s what a gold standard would do (which is why they ’d fight it), and it’s why the gold price would answer to currency dilution. Gold can’t be diluted.

• Gold is the standard against which all currency values are measured - not the other way around.

Yes, the gold price has been stagnant, but this can not last. Especially when the Fed is forced to break interest rate hikes and needs to start creating more and more currency again.

In my opinion this stuff is very likely to start in 2023. which will (most likely) kickstart the coming bull run in gold — perhaps the big one we ’ve all been staying for, right? Which is why I ’m not upset about the worth in the short term (one year).

It’s also why I ’m not worried about gold within the long-term. Until the monetary system is restructured, we must own it. We can reconsider how much to own once we have a more sound, honest, responsible financial system.

Further currency creation is guaranteed to come. That signals to investors to protect with one asset (gold) that can’t be diluted, debased, or destroyed.

Hope you have enjoyed this article!

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