Gold, and now silver as well, keep climbing to new highs. Perhaps the most simple interpretation is that Investors appear to be worried about the world level of debt, and its increasing cost. For instance, the U.S. has added, just over the last 3 weeks, $473Bn of new debt for a total of $35.8Tn. And the cost of servicing that debt has surpassed $1Tn for the first time in history. The pace is around $4Tn of new debt a year, which in the end, damages the full faith and credit of the number 1 economy in the world. At some point not too far away, rating agencies will downgrade the US credit rating. In fact, perhaps the only reason they haven’t done so is because we’re 2 weeks away from the elections and it would be interpreted as interference (almost everything is, these days). At the same time, the long end of the Treasury yield curve is going up, further increasing the cost of debt should the treasury decide to issue additional long term debt. How do we get out of this trap? Which candidate, once elected, will be the best one to apply austerity and slow this debt train? Is high inflation the only viable solution to decrease the debt burden?
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