Dollar Crashing to Zero under an Unsustainable Amount of Debt
Jerome R. Corsi, Ph.D.
The U.S. dollar has joined other major currencies in a race to zero value as central banks are failing, unable to preserve purchasing power in fiat currency that has lost 100% of its value since the U.S. went completely off of the the gold standard under President Nixon in 1971.
This is the conclusion of Egon von Greyerz, the founder of Matterhorn Asset Management AG, an investment management company headquartered in Switzerland. A chart published by von Greyerz shows that the U.S. dollar, along with other major currencies around the globe, has lost over 90 percent of its value since 1971. The sad truth in this same time frame, U.S. national debt has on the average doubled every 8 years since Reagan assumed the presidency in 1981.
Even more alarming, the Congressional Budget Organization (CBO) published a study last month, September 2020, that reported the national debt will rise to nearly twice the U.S. total economic output in 2050, an increase from less than 80 percent since last year.
Economists have traditionally pressed the flashing red alert when a country’s national debt exceeds 100 percent of the Gross Domestic Product (GDP), a red-line target the U.S. is rapidly hitting, on the way our national debt being nearly 200 percent of GDP and exceeding only 30 years from now. “By the end of 2020, federal debt held by the public is projected to equal 98 percent of GDP,” the CBO report warned. “The projected budget deficits would boost federal debt to 104 percent of GDP in 2021, to 107 percent of GDP (the highest amount in the nation’s history) in 2023, and to 195 percent of GDP by 2050.”
The COVID-19 pandemic has led to a bout of deficit spending that is unprecedented in American history. The CARE Act, passed by Congress as a COVID-19 relief measure, provided $1.8 trillion in direct aid to individuals and businesses, the largest in U.S. history. Altogether, the Trump administration and Congress have enacted three separate COVID-19 relief packages at a total cost of over $2 trillion.
As a result of this runaway deficit spending, the price of gold has surged to price at or above the $2,000/ounce technical resistance level, with silver challenging a multi-year high mark trading at the $30/ounce technical resistance level. Metal analysts are predicting that uncertainty and cycle events could continue gold and silver price appreciations until 2024 and 2025. In the near term, technical resistance charts suggest gold’s next target are the $2,000-$2,5000 resistance level, followed by $3,200, and then $5,000.
Nor is there any end in sight to U.S. deficit spending. On October 1, 2020, the Democrats controlling the House passed a second $2.2 trillion COVID-19 relief bill, resulting in another round of talks with the GOP majority in the Senate over a compromise bill. Treasury Secretary Steven Mnuchin and House Speaker Pelosi, D-Calif., are both under political pressure to deliver a $400 per week pandemic jobless benefit and to extend loans to businesses seeking to retain employees in continuing government-imposed economic shutdowns to contain the epidemic.
Economist John Williams, on September 16, 2020, in the subscription newsletter on his ShadowStats.com newsletter, that the decision by the Federal Open Market Committee of the Federal Reserve to abandon the 2 percent inflation target the Fed has maintained for years signals no end to deficit spending. In his special hyperinflation alert issued June 3, 2020, Williams wrote: “For decades, the ultimate fate of the current U.S. dollar, the economy and financial system have been at risk of hyperinflationary collapse. The Coronavirus pandemic crisis could be the trigger.”
Williams noted Consumer Price Index (CPI) inflation in the United States from 1970, the last year of the gold-backed U.S. Dollar, to date has been 561 percent. In the same time frame, the increase in the U.S. price of gold (1970 to date) has been 4,314 percent. “Gold and silver prices remain the canary in the coal mine of hyperinflation,” William warned.
For decades, Williams has been looking at an eventual hyperinflation crisis and effective long-range U.S. government insolvency. In 2004, when the “Financial Report of the U.S. Government” showed the fiscal and long-term financial operations had deteriorated to the point of unsustainability, Williams began predicting the long-term insolvency risks of the U.S. Treasury – an unsustainable budget deficit and sovereign debt levels – would lead to a U.S. hyperinflation likely around 2018-2018.
For decades Williams has predicted U.S. economic trends correctly. Perhaps we should all listen even more closely today when Williams warns us that “physical holdings of precious metals such as gold and silver are traditional stores of wealth, which tend to preserve the purchasing power of one’s income, wealth, and assets.” Now, in his most recent 2020 newsletters, Williams is insisting that “this is a good time to be holding physical gold and silver.”