You may well ask, what does the demise of the US Dollar have to do with us here in South Africa? The reason is simple. The saying “If the US sneezes, the rest of the world catch a cold” is actually very true. In order for us to prepare for our financial future given the coming financial markets meltdown, we have to look at what is going on in the United States. I have repeatedly written about the US stock market meltdown and we are starting to see serious cracks on a daily basis. I have not seen panic yet, but if you see the panic, it is too late to do anything about it.
A good question to start off with is “How will the US economy expand?” The US economy can only expand if the US dollar stays strong. The main culprit of the weakening dollar is money printing by the Federal Reserve. In order to put thing into perspective, let us look at some history on the US financials over the years.
In 1980, Jimmy Carter was president and running against Ronald Reagan for re election. At the time the US budget to run the country was $500 billion. Because the budget was so big, Carter lost the election. Today the US budget to run the country is $4.5 trillion per year. The government has increased 9 times (500%). The budget deficit is 1 to 1.5 trillion dollars per year. Government debt now stands at $30 trillion. Please sit up and take notice because here is the most important figure in the world right now. For government to pay its debt at roughly 2% per year, they have to fork out $600 billion per year! We all know the concept of compound interest on our savings. The US government is actually compounding its debt! If you invest your money at 6.9% compound for 12 years, your investment will double. If you invest at 12% per year, your investment will double in 6 years. If the US government is compounding $30 trillion worth of debt, what will their yearly repayments be in 6 years from now? Short answer, there is no way that they will be able to pay their debt. They will default! We are not even taking into account the astronomical amount of government bonds that are in the hands of China and Japan. With a weakening dollar, Japan and China will be forced to dump the US bonds which will totally collapse the US dollar. On the world currency index, the US dollar dropped from 123 to 95.
It is estimated that for every 1% the dollar loses in value, gold and silver will go up by 4%. In the US today, the shortage of especially silver coins and round has not been as problematic as right now in the last 46 years. We in South Africa are very blessed that we can still get silver coins freely and at a very reasonable price. How long this will last is anybodies guess. If we do run into shortages though, you will not be able to get silver coins at all!
Disclaimer – Precious Metal Bars (Pty) Ltd is not a registered investment, legal or tax advisor. All investment/financial opinions expressed by Precious Metal Bars are from the personal experience and research of the owner of this site and are intended as educational material. Although best efforts are made to ensure that all information is valid and up to date, occasionally unintended errors and misprints may occur. Unsubscribe
Cookie | Duration | Description |
---|---|---|
cookielawinfo-checkbox-analytics | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics". |
cookielawinfo-checkbox-functional | 11 months | The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". |
cookielawinfo-checkbox-necessary | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary". |
cookielawinfo-checkbox-others | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. |
cookielawinfo-checkbox-performance | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance". |
viewed_cookie_policy | 11 months | The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data. |
Our Precious Metals research will assist you in making informed decisions
Owning Physical gold and silver will protect the buying power of your money as a safe haven investment
WhatsApp us