The U.S. is running massive deficits as the nation’s indebtedness continues to grow. Speaking at the Economic Club of Washington D.D., Fed Chairman Jerome Powell recently acknowledged the issue. In a piece by cnbc.com, Powell was quoted as saying “I’m very worried about it. From the Fed’s standpoint, we’re really looking at a business cycle length: that’s our frame of reference. The long-run fiscal, nonsustainability of the U.S. federal government isn’t really something that plays into the medium term that is relevant for our policy decisions.”
Powell’s comments come as the U.S. reaches a sustained deficit level above the $1 trillion mark. To be clear, the nation has run a deficit above $1 trillion before. Although carrying such a deficit is never a positive thing, the current situation is especially concerning as it is happening during a period of sustained economic growth.
Total U.S. debt is approaching $22 trillion and the cost of maintaining that debt is on the rise. Each time the central bank hikes interest rates, the debt burden becomes even more challenging. The notion of the Fed raising rates as the deficit increases as a share of GDP makes the situation even more perplexing.
The country won’t be able to sustain such deficits in the long-term, and something, at some point, must give. Given that higher rates and a stronger dollar make the problem worse, the only solution may be lower rates and a weaker dollar.
There is, of course, a major downside to a weaker dollar: The weaker the currency is the less it buys. In other words, with a declining dollar comes a decline in purchasing power and net returns.
Given the unsustainability of the deficit and total debt load, the question is not “if” but rather “when” those that control spending and monetary policy will have to take drastic action.
The fiscal outlook warrants forward-thinking and the necessary diversification to handle what may be coming down the pike. If a weaker dollar-perhaps even a major currency debasement-is the only way out, now is the time to diversify with asset classes that could stand to benefit.
Physical gold should be at the top of your list.
Gold often exhibits a negative correlation to the dollar, and as a dollar-denominated commodity could potentially see significant upside if the dollar depreciates.
Adding this key asset class to your portfolio has also never been easier. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and how this asset may play a key role going forward. Our associates are here to answer any questions you may have and can even show you how simple it is to build a significant allocation in gold using an IRA account.
Don’t wait for the next major economic crisis or for a weaker dollar to erode your purchasing power further. Explore your options for gold ownership today. Call Advantage Gold at 10800-341-8584 to get started now.Tags: advantage gold, deficit, Fed, gold, indebtedness, interest hikes, jerome powell