DRIGGS, IDAHO – The national debt is over $27 trillion and rising so fast, it’ll double over the next 10 years at this rate.
This debt will never be paid off by “normal” means.
Paying it off by normal means would mean a punishing increase in taxes, a drastic cut to the defense budget, and a default on entitlements like Social Security and Medicare.
This will never happen…
The easier way out – a way that’s been used successfully in the past – is to devalue the dollar. What does this mean for alternative stores of value like gold and bitcoin? More below…
Hunkering Down for the Winter
Greetings from rural Idaho…
My family and I spent the last two-and-a-half years traveling around the world. But recently, we shelved our passports…
We’re currently living in one of the coldest, snowiest, bitterest places in North America.
We’re going to spend the winter here, getting dumped on by snow, and skiing in the nearby mountains.
We’ll emerge again in April. In the meantime, we’re hanging out together in our Airbnb, doing homework, playing board games, eating well, and watching educational television…
The boys watching TV and having breakfast in bed
A New Monetary System
Back to the U.S.’s gargantuan debt problem…
The U.S. has the world’s greatest hoard of gold. The authorities could raise the price of gold overnight to some very high number… perhaps $10,000… thereby making each dollar worth one ten-thousandth of an ounce of gold.
This would be very inflationary since all the other countries who hold gold… and all the private citizens who own gold… would now effectively be sitting on a pile of new dollars.
Foreign central banks would immediately devalue their currencies against gold by the same measure to maintain competitiveness. The price of everything would rise.
Effectively, the government would have defaulted on 80% its debt – but it would be what we’ve been calling a “soft” default. That’s because it would allow the government to pay off its gargantuan debt in full, just with vastly watered-down dollars.
In the end, we’d have a new monetary system, linked informally to gold again, but without the gargantuan debt overhang we have today.
Biggest Changes in Money Since Bretton Woods
This is the only way to solve the debt problem. And it would trickle down and solve the debt at all levels of society, not just at the federal level.
This is the same strategy President Roosevelt used to bring the U.S. out of the Great Depression in 1934, when he raised the gold price from $20 to $35.
This idea may sound a little far-fetched today… but its time is coming. I can hear the debate getting louder every day.
People are beginning to discuss new payment systems, like bitcoin… as well as alternative financial systems based not on banks but on state-issued digital currencies.
Lots of smart money managers – like Sam Zell and Warren Buffett – are buying gold.
And Goldman Sachs (the second-largest investment bank in the world) acquired its first gold ETF in September.
I also think the Chinese, the Russians, and some other countries can see this coming. They’ve started accumulating gold in a very determined way. (China is the world’s No. 1 producer of gold today, but no one outside of China knows how much gold they own. It’s probably more than anyone realizes.)
Over the next 10 years, I think we’re going to see the biggest changes in payments and money since the Bretton Woods conference in 1944… and a rising gold price is going to be at the center of it all.
The Only Reason Bitcoin Has Any Value Today
I’ve received quite a lot of feedback on my recent bitcoin essays, where I suggested bitcoin is a fatally flawed concept and history will show it isn’t worth anything.
One person called my ideas “daffy”… and another said my ideas were “superficial.”
But if you look through history, anything that’s been used as money has either been a valuable commodity (gold, wheat, beaver pelts)… or it had an issuer standing behind it and giving it value (airline miles, medieval tally sticks, Federal Reserve Notes).
Bitcoin is neither.
It has no intrinsic value nor any issuer standing behind it and giving it value. It’s just an elegant score-keeping system that runs on autopilot.
The only reason bitcoin has any value today – in my opinion – is because there’s a big new segment of tech-loving investors who think bitcoin solves the problem of the paper dollar.
That is, bitcoin can’t be inflated or monitored, and it doesn’t rely on the incumbent banking system. So it’s seductive in this age of bloated dollars and bankrupt governments.
Prediction: The current monetary system will be replaced… by something (or somethings) other than bitcoin.
Bitcoin will continue to be a nerdy side-project until then. And then, it’ll fall by the way…
– Tom Dyson
P.S. Two years ago, I went “all in” on a single trade… You see, the financial system is rotten to the core with intervention, manipulation, fake money, fake trades, fake deals, fake news, and robotic trading. The system has become very, very fragile.
The bottom line is, I don’t want to participate in this toxic mess. I want to sit on the sidelines in this one trade and get on with my life… until it’s safe to return to the financial system. It’s a trade that will play out over several years. But I have total conviction in this idea. Learn more here…
Readers enjoy Tom’s travel stories and his take on gold… and appreciate Tom’s change in schedule…
Reader comment: I certainly love your position on gold. My IRA is in gold and silver, and I have gold and silver (mostly coins) in a safe deposit box (realizing that safe deposit boxes are not insured). I also enjoy reading about your travels with your family.
My wife and I took a great road trip a few years back from Rancho Cucamonga, California, to the Arctic Circle. My working life (I am now retired) took me all over Southeast Asia, the western U.S., British Columbia, Alberta, Saskatchewan, Nova Scotia, Newfoundland, Ontario, Maine, New York, Pennsylvania, Connecticut, D.C., and Maryland. I also visited North Africa, Nairobi, Thailand, and the Philippines on mission trips. I also took a 20-cents-a-day trip through Northern India and Nepal in 1971.
Reader comment: Love your travel exploits. They remind me of my travels around the world when I was 32, travelling from New Zealand to Australia, across Indonesia and Southeast Asia. Keep up the adventure. Your kids will cherish these times as the freest and most memorable in their lifetimes, no doubt. I am also 100% behind your investment strategy in gold since it has last 5,000 years so far.
Reader comment: I’ve been following your posts for a while and love your story. More young families would do well to follow suit. I’ve lived in Idaho, Utah, and Wyoming most of my life and have explored every corner of all of it. If you’re so inclined, I would love to visit with you about places you would not want to miss while you are in the area. I don’t think there is any place on Earth like it. You picked a great place to land and learn to ski.
Reader comment: I applaud your decision to cut back to three days. Now I won’t have to worry about missing a day as much! And you get to spend more time with your kids. Treasure the time as it will be over in a blink of an eye. Teach them new sports, especially doubles badminton and table tennis. Builds coordination and teamwork, when you are snowed in!
Most of all, laugh. They will remember the crazy fun more than anything else. And you’re right about bitcoin, it’s a mania and a charade. Stay warm!
Tom’s note: As always, thank you for your messages! We read every note you send us. Please keep your questions and comments coming at [email protected].