Silver Prices Hitting the Roof

[gmerkt]

The last time this was done in the 1930's the value of the dollar effectively dropped about 50% overnight. That would effectively cut our debt in half. While that might not be the impact this time, my current understanding is that it would make the deficit and debt appear to be lower but would also effectively transfer a massive amount of wealth from the working/middle class and the poor to the ultra wealthy.

Updating the US gold stock to contemporary values would just be an accounting adjustment. In my view, I don't see how it would impact the size of the national debt. Unless the US Government sold off some of the revalued gold and applied the proceeds to pay down the debt. Which isn't very likely, given government behavior in the past. In any case, the rewards of revaluing the US gold reserve would be less than a current single year of federal budget. While inflationary, the amount involved would be less than several of the stimulus measures carried out in the Covid era. So it wouldn't be hugely inflationary.

We can't relate the 1934 model of dollar devaluation to the contemporary setting. Because deflation was the central economic problem in 1934, and inflating the dollar was a tool used to fight deflation.

There could be some argument that a massive sell-off of government gold would lower the value of the metal across the board. Something the government would likely not like, unless they were able to sell the entire lot at once. Which seems unlikely. A sale that lowered the value of gold would be contradictory to the goal of realizing the full value of the asset when sold over time.

Then there is the issue that gold has steadily risen in value (with a few bumps in the road) since 1974. The government isn't losing money by holding onto their gold. Theoretically, the longer they keep it, the value will at least keep pace with inflation. Once gone (ask the British), there is no more experience of appreciation.

With all the foolishness going on in US government these days, anything could happen. After all, we have a former hedge fund manager for Secretary of the Treasury. Stripping assets is one of the things that hedge funds do to get easy money.

Just my opinion.

 

[CrackPipe]

Damn, I had no idea the gold the US holds is valued like that. Depending on how much we still have what the hell is it really worth now days ?

This is my understanding... The valuation of gold in this case does not really matter as it's just a note held between the Treasury and the Federal Reserve. However, IF they revalue it and re-issue the note(s), one effect is that the government can show a budget surplus for a period of time, but it's not a real surplus. Gold is about $4,200/oz today. They could revalue it at $15,000 if they want to and it would appear to eliminate the deficit and lower the debt. IF it actually lowered the debt, it would only be due to the dollar losing value because of that revaluation.
The bottom line is that there are a LOT of games the government can play with monetary instruments and when you throw gold, silver and crypto in there, it's incredibly complex. I've had formal education on this and worked on Wall Street in the currency trading space and most of this is beyond my ability to articulate.
But don't worry, I'm sure the billionaires making and guiding these policies and new laws like the GENIUS Act have our best interests in mind. (sarcasm)

 

[Alexx1401]

This is my understanding... The valuation of gold in this case does not really matter as it's just a note held between the Treasury and the Federal Reserve. However, IF they revalue it and re-issue the note(s), one effect is that the government can show a budget surplus for a period of time, but it's not a real surplus. Gold is about $4,200/oz today. They could revalue it at $15,000 if they want to and it would appear to eliminate the deficit and lower the debt. IF it actually lowered the debt, it would only be due to the dollar losing value because of that revaluation.
The bottom line is that there are a LOT of games the government can play with monetary instruments and when you throw gold, silver and crypto in there, it's incredibly complex. I've had formal education on this and worked on Wall Street in the currency trading space and most of this is beyond my ability to articulate.
But don't worry, I'm sure the billionaires making and guiding these policies and new laws like the GENIUS Act have our best interests in mind. (sarcasm)

Well if it goes over someone with real education in this I feel a lot better that it goes over mine too
Since price on silver has not really changed I dropped another 20 oz at the same dealer again today. Paid for a new camera system I had been wanting for a while. So now I can tell Wife it was free

 

[CrackPipe]

Updating the US gold stock to contemporary values would just be an accounting adjustment. In my view, I don't see how it would impact the size of the national debt. Unless the US Government sold off some of the revalued gold and applied the proceeds to pay down the debt. Which isn't very likely, given government behavior in the past. In any case, the rewards of revaluing the US gold reserve would be less than a current single year of federal budget. While inflationary, the amount involved would be less than several of the stimulus measures carried out in the Covid era. So it wouldn't be hugely inflationary.

Yes, it would only be an accounting adjustment, but it would show on the deficit for that year and it could be significant if they value it at 15k/oz which they can. It would NOT affect the debt value but it would effectively reduce the debt IF it caused inflation. Sorry if I was not clear.

 

[jbett98]

View: https://www.youtube.com/shorts/j8EvqCbaD_I?feature=share

 

[Cavedweller]

"If you start to see slowdowns in AI investments or a slowdown in the global economy, you could see some pullback in silver prices. But in our view, silver has actually been underinvested in for so long that we think there's still considerable room to run for silver."

"The main difference that we see between the two metals [is that] gold has central bank buying associated with it, silver doesn't have that underlying demand," he concluded. "So expect a little more volatility with silver – even to the upside. That's one of the things that could potentially cause a pause in upward movements."

Why gold revaluation charts put prices at $25,000-$55,000 if history rhymes, silver poised for breakout: Crescat Capital Strategist

The Kitco News Team brings you the latest news, videos, analysis and opinions regarding Precious Metals, Crypto, Mining, World Markets and Global Economy.

www.kitco.com

 

[gmerkt]

This is my understanding... The valuation of gold in this case does not really matter as it's just a note held between the Treasury and the Federal Reserve. However, IF they revalue it and re-issue the note(s), one effect is that the government can show a budget surplus for a period of time, but it's not a real surplus. Gold is about $4,200/oz today. They could revalue it at $15,000 if they want to and it would appear to eliminate the deficit and lower the debt. IF it actually lowered the debt, it would only be due to the dollar losing value because of that revaluation.

The gold certificates that the Fed holds dating back to 1934 represent only a small part of the gold that the Treasury Dept. holds. Those notes specifically are not convertible or redeemable.

A revaluation to anything like $15K / oz from what we can see at this stage is highly speculative. The deficit and the debt are two different things. The deficit is the shortfall of available funds within a given fiscal year. The debt is the cumulative accrual of all the deficits that have gone before. "Eliminating the deficit" with the proceeds of the revaluation of gold wouldn't go very far, even at $15K. Accordingly, it would be a BB in a boxcar toward eliminating the overall debt.

I've got a solution. One that I've considered for many years. Simply repudiate the entire national debt. Stiff all the holders of US Government debt. The losers in that deal would be people and entities who could afford it. That's benefit Number One, because we would no longer have to spend tons of money financing the interest on the debt. Some people would say, "But then no one would ever lend us money again." That's benefit Number Two. It would force the country to go on a non-credit, cash basis. The politicians wouldn't be able to spend money they didn't have.

Whatever the solution and the future may hold, the gold owned by the US Government should not be sold. It should be held intact for an emergency. I'm thinking of some kind of currency reform where the present USD loses so much value it is no longer recognizable as a form of exchange. The government of the moment could then introduce an NUSD (New US Dollar) that has a partial gold backing. Reconstituted as a semi-fiat currency might just make it work. There is precedent for this. At one time, the Swiss Franc was a semi-fiat currency. It hasn't had any gold backing since 2000; but the Swiss Franc is still respected even as a full fiat currency, because Switzerland retains a large government gold stash.

 

[sobo]

I've got a solution. One that I've considered for many years. Simply repudiate the entire national debt. Stiff all the holders of US Government debt. The losers in that deal would be people and entities who could afford it. That's benefit Number One, because we would no longer have to spend tons of money financing the interest on the debt. Some people would say, "But then no one would ever lend us money again." That's benefit Number Two. It would force the country to go on a non-credit, cash basis. The politicians wouldn't be able to spend money they didn't have.

I this idea!

 

[arakboss]

The gold certificates that the Fed holds dating back to 1934 represent only a small part of the gold that the Treasury Dept. holds. Those notes specifically are not convertible or redeemable.

A revaluation to anything like $15K / oz from what we can see at this stage is highly speculative. The deficit and the debt are two different things. The deficit is the shortfall of available funds within a given fiscal year. The debt is the cumulative accrual of all the deficits that have gone before. "Eliminating the deficit" with the proceeds of the revaluation of gold wouldn't go very far, even at $15K. Accordingly, it would be a BB in a boxcar toward eliminating the overall debt.

I've got a solution. One that I've considered for many years. Simply repudiate the entire national debt. Stiff all the holders of US Government debt. The losers in that deal would be people and entities who could afford it. That's benefit Number One, because we would no longer have to spend tons of money financing the interest on the debt. Some people would say, "But then no one would ever lend us money again." That's benefit Number Two. It would force the country to go on a non-credit, cash basis. The politicians wouldn't be able to spend money they didn't have.

Whatever the solution and the future may hold, the gold owned by the US Government should not be sold. It should be held intact for an emergency. I'm thinking of some kind of currency reform where the present USD loses so much value it is no longer recognizable as a form of exchange. The government of the moment could then introduce an NUSD (New US Dollar) that has a partial gold backing. Reconstituted as a semi-fiat currency might just make it work. There is precedent for this. At one time, the Swiss Franc was a semi-fiat currency. It hasn't had any gold backing since 2000; but the Swiss Franc is still respected even as a full fiat currency, because Switzerland retains a large government gold stash.

"Stiff all the holders of US Government debt. The losers in that deal would be people and entities who could afford it."


My mom owns government debt (bonds). She might not agree that she can afford the government defaulting on those bonds. She lives on Social Security, cleaning houses and cashing in bonds when she has too.

 

[Mono1]

"Stiff all the holders of US Government debt. The losers in that deal would be people and entities who could afford it."


My mom owns government debt (bonds). She might not agree that she can afford the government defaulting on those bonds. She lives on Social Security, cleaning houses and cashing in bonds when she has too.

Yeah, it all sounds good on the surface until you think things through. Anybody with a 401K that's in a "Balanced Portfolio" means half their money is in UST's.

This is the same argument I confront when people tell me about the Evil Corporations screwing all of us whether it be on the price of Oil, food, you-name-it. I always ask "do you have a 401K?" . Inevitably the answer is "yes".

Well, YOU are reaping those Profits.

 

[gmerkt]

My mom owns government debt (bonds). She might not agree that she can afford the government defaulting on those bonds. She lives on Social Security, cleaning houses and cashing in bonds when she has too.

It would be reasonable to make an exception for small holders of US bonds. I don't think there are many retail buyers of EE bonds these days.

I would be a loser in this scenario; I've got money invested in US Gov't securities in a retirement plan from when I was working. I wouldn't miss it. I'm at the age now where they compel me to make an annual mandatory minimum withdrawal.

Yeah, it all sounds good on the surface until you think things through. Anybody with a 401K that's in a "Balanced Portfolio" means half their money is in UST's.

If they have a 401k, they can afford to lose some. After all, they lose money when the market takes a dip.

 

[CrackPipe]

I've got a solution. One that I've considered for many years. Simply repudiate the entire national debt. Stiff all the holders of US Government debt. The losers in that deal would be people and entities who could afford it. That's benefit Number One, because we would no longer have to spend tons of money financing the interest on the debt. Some people would say, "But then no one would ever lend us money again." That's benefit Number Two. It would force the country to go on a non-credit, cash basis. The politicians wouldn't be able to spend money they didn't have.

The impact would not just be on people directly holding bonds. Yes the 401k's would take a hit, but also pensions as those funds are often heavily invested in bonds. Then there would be the impact on interest rates, including business loans. US Treasuries also underpin much of the worlds financial systems and a default would cause an international financial crisis. Couple that to the dollars reserve currency status which would be put at further risk. It's a long list of negative consequences and absolutely no one knows how severe that impact would be, but the consensus is that it would cause lasting damage to the US economy.

The alternative is to do "quantitative easing", which they are already doing. The negative consequences of that are far less, but it still hurts almost every one of us as I think we all know. That is likely the primary solution that will be implemented. With that, holding dollars is unwise. The most sophisticated financial institutions on the planet, the central banks, know this and have been accumulating gold at a rate of just over 1000 tons a year for the past three years.

There is not a painless solution for racking up a debt that can't be paid in a reasonable manner. It's a pick your poison and see what happens situation.

Not sure if that was helpful. I am no expert on this stuff, but I do know enough to realize there is a LOT I don't know or understand.

 

[Medic!]

The Bond market is many times larger than the stock market.
The Treasury dose something like 650 billion in auctions every week.

So destroy that and destroy the dollar.
You know . The dollar!

The same dollar your gun, house, car, and everything else is priced in.


Ya. The Bond market crash would make the Stock Market crash of 1929 look like a Sunday picknick.

 

[arakboss]

The best option would be to balance the budget and start slowly paying down the debt.

 

[CrackPipe]

The best option would be to balance the budget and start slowly paying down the debt.

Wouldn't that be nice.

 

[arakboss]

Wouldn't that be nice.

It will probably never happen but it would be nice.

 

[gmerkt]

The best option would be to balance the budget and start slowly paying down the debt.

That's not likely to happen. Because the country has gotten used to the habit of spending beyond its means. Politicians don't get re-elected by taking away, but mainly by giving out or promising things. Also there is the matter of the government making up the difference whenever the economy dips rather than allowing it to adjust by normal economic process. The worst of this has occurred in the past 25 years. If the acceleration continues, we are doomed.

 

[Knobgoblin]

Wouldn't that be nice.

 

[gmerkt]

The impact would not just be on people directly holding bonds. Yes the 401k's would take a hit, but also pensions as those funds are often heavily invested in bonds. Then there would be the impact on interest rates, including business loans. US Treasuries also underpin much of the worlds financial systems and a default would cause an international financial crisis. Couple that to the dollars reserve currency status which would be put at further risk. It's a long list of negative consequences and absolutely no one knows how severe that impact would be, but the consensus is that it would cause lasting damage to the US economy.

With the debt closing in on $40 Trillion, this is going to happen anyway. It's just a matter of how it unfolds.

The reserve currency status is probably going away anyway, much like happened to the Pound Sterling. The De-dollarization process has already begun, BRICS, central banks swapping dollars for gold, etc. So we don't need to worry about that coming because it's already in motion.

A slam-dunk repudiation of the debt would be a nice, clear break that avoided a long, drawn-out mess. Which would catch the biggest holders of US debt holding the bag. Like China, Japan, and (sadly), the UK. The US Gov't itself holds a bunch of US debt, but it's all fake accounting. Like the so-called trust fund for Social Security, which is 100% US Gov't securities. Seeing as how the government doesn't have the money to cash those in now or later, how much are they really worth? They represent real money that was paid into the trust fund by US workers that the government went ahead and spent as general fund money. So if those were wiped off the books, it wouldn't make any practical difference.

An "international financial crisis" is exactly what is needed to correct the economic misbehavior of the past (at least) 25 years. An adjustment back to some kind of sane normality needs doing. Governments have been trying to avoid this normal economic adjustment process in order to keep their constituents comfortable and happy. And look what it's gotten us.

There really is no way the US Gov't will ever be able to retire US debt in the many trillions of dollars in terms of actual spending power. It's simply gotten too big. Anything done now is a holding action. There are no pretty solutions to it. The easiest political situation is the one that is being followed right now. That is, slowly rob everyone by incremental inflation of the currency.

 

[Mono1]

Thoughtful comments by both @CrackPipe and @Medic!

Appreciate the posts.