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When You Need Gold

There aren't many times to favor Gold Investment over buying productive assets...

THEY FOUGHT the correction, but the correction won, writes Bill Bonner in his Daily Reckoning.

We refer to Bernanke, Summers, Obama, Geithner, Krugman – the whole lot of them. They added three trillion dollars to US debt in the last two years. In two more years the debt will be at 100% of GDP. Add in the debts they've guaranteed...from Fannie Mae, for example, and state and local debt implicitly backed by the feds...and you're already at 150% of GDP.

Worse than Greece, in other words. And what do we get for it? A recovery? A healthy economy? A gold medal?

We'll take the gold medal, thank you. It's the only one that's real.

The stock market was ready for a little bounce Tuesday. So that's what it did...a little bounce – the Dow up 123. Gold kept climbing, however – up to a new record high above $1,250 an ounce.

If you had asked us 10 years ago which we'd rather have – stocks or gold – we would have said gold. Ask us now. Same answer.


There aren't many times when it makes sense to favor Gold Investment over productive investments. But this is one of those times.

Why? Because the world's monetary system is heading for a crackup. And because the people running it have no idea what they are doing. Here's Bloomberg:

Pimco's Crescenzi Sees 'Endpoint' in Devaluations

June 8 (Bloomberg) – Nations have reached a "Keynesian endpoint" as exhausted balance sheets leave policy makers with few options to bolster economic growth, according to Anthony Crescenzi, an investor at Pacific Investment Management Co., the world's largest bond-fund manager.

"Time, devaluations, and debt restructurings might be the only way out for many nations," Crescenzi wrote in an e-mailed note titled 'Keynesian Endpoint' that referenced the Great Depression era economist John Maynard Keynes. Debt-fueled spending programs aimed at combating the global financial crisis of 2008 are among policy tools now "being seen as a magic elixir that has morphed into poison."

The Obama administration forecast a $1.6 trillion budget deficit, the most ever, in the current fiscal year that began Oct. 1.

You can fight a correction. You can delay it. You can distort it. You can make it bigger and nastier. But you can't beat it. Eventually, mistakes have to be way or another.

Usually, the mistakes take the shape of bad investments or bad loans. You can pretend that they're still worth what you have in them. You can bail out the lenders and/or the investors. You can default and inflate. But somehow, someone, sometime is going to take a loss.

That's when you need gold. Every other asset could have bad debt behind it...or standing so close beside it that a blow-up would be damaging.

The correction that began in '07 was needed to address all the bad debt built up in the bubble years. The feds tried to stop it. Since they didn't have any money they had to fight it by borrowing more money – that is, by increasing the level of debt!

We knew that wasn't going to work.

And now, there's bad private debt...and bad public sector debt too. And now we're approaching a Keynesian "endpoint" when lenders are growing wary. They've already cut off Greece. They've warned the rest of Europe. And when they stop lending...then, all your props fall down...along with the economy...and the markets too.

Looking to make a solid Gold Investment today...?

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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