The U.S Government Is Broke

BUENA VISTA, COLORADO – The U.S. government is broke. It’s about to default on its obligations.

(We’ve been calling this a “soft” default as opposed to a “hard” default. That’s because creditors will get repaid in full, but with watered-down currency.)

The chart you’ll see below shows the moment the world decided it wouldn’t keep financing the U.S. government’s gargantuan spending habit…

More on that below. First…

“Heart-Surfing” in Denver

Greetings from the banks of the Arkansas River…

My family and I are on an epic road trip around America. We’ve been on the road for nearly three months and have visited 17 states so far. We’ve still got a long way to go…

This weekend, we descended from the mountains and had a fantastic weekend couch-surfing in the Denver area. Here we are with our hosts…

(Kate says it’s “heart-surfing” because we fall in love with the kind-hearted, generous people who host us and make us part of their family while we’re there. We have a fantastic time. Then, when we have to say goodbye and move on, we get very sad.)

Our Latest Campsite

We’ve driven about 150 miles south of Denver today. Now I’m writing to you from our latest campsite… in the Arkansas River Valley.

Here’s our campsite…

An abandoned train track – the old Denver and Rio Grande mainline through Buena Vista – also runs down the valley. It runs right past the campground.

We found this 140-year-old bridge near our camp. It’s crossing the Arkansas River. (This is supposed to be a fantastic fishing spot.)

Our First Checkups in Years

This weekend, as we were in a big city, we took the family to the dentist and the doctor. (These were our first checkups in years.)

We were all healthy, except for one small issue…

The doctor looked into Penny’s ear with an otoscope and noticed something black, deep inside her ear canal, almost next to her eardrum.

“It’s a foreign body,” he said.

He carefully pulled it out with his long tools and lots of lubricant, and…

It was a raisin!

Penny must have put it in her ear when she was a toddler. She had been carrying it around in her ear for years.

The U.S. Government’s Day of Reckoning

Back to the chart I mentioned earlier…

In 2014, the world stopped growing its holdings of paper currencies. You can see the peak in the chart below…

This has hit U.S. dollar holdings especially hard.

Not only has the total stock of currency reserves stalled out… But over the last 20 years, the dollar has slipped from 72% to 62% of total global paper currency reserves.

You can see this in the next chart…

This will go down in financial history as the moment the U.S. government’s “day of reckoning” began.

Why? Because for decades, the rest of the world had happily considered the U.S. government’s bonds as “good as gold.” They had plowed their savings into Treasurys.

Essentially, under the dollar-standard financial system, the world allowed the U.S. government to borrow as much money as it pleased – on very favorable credit terms – and run the largest budget deficits ever seen.

But in 2014, that shifted… and foreigners ended the U.S. government’s “exorbitant privilege.”

Classic Sovereign Debt Crisis

The U.S. government is now caught in a classic sovereign debt crisis… just as the governments of Mexico, Brazil, Russia, Argentina, Zimbabwe, Venezuela, and many others have been before it.

Right now, we’re in the stage where the government’s spending is still out of control (it’s in denial about its financial position). It relies on the Federal Reserve’s money printer and local banking system to finance it.

What happens next is very predictable…

First, they run the printer too hot. Creditors lose faith in the U.S. government’s ability to honor its debts in hard currency.

Second, there’s a run on the dollar (and all paper currencies because the dollar IS the king paper currency).

Third, gold hyperinflates.

This process will take a while to play out. I’m mentally prepared for it to take five to 10 years…

– Tom Dyson

P.S. I created an entire trade to take advantage of this setup. And I invested nearly $1 million of my own money into this strategy. Since May, the gold stocks I recommended to my subscribers are up as much as 58%… 61%… even 155%. But this trend is just getting started. I explain why – and how you can get access to the 11 gold stocks I recommend today – in this video…

P.P.S. Thank you to all of you who support us… whether it’s by taking us in… or by just writing to us and offering us your kind words. You keep us going. It’s no exaggeration to say we would have ended this trip months ago if it wasn’t for you. So thank you, again.

And please keep your questions coming, too. I try to answer them all in the mailbag (forgive me if I sometimes miss one). As always, write us at [email protected].

Like what you’re reading? Send your thoughts to [email protected].

A positive update from Tom’s father on the health front…

Comment from Tom’s father: Good news. PET Scan shows the cancer hasn’t spread to the rest of the body. No chemo!!!

Meanwhile, last Wednesday’s Postcard “scared the bejesus” out of one reader…

Reader comment: Good morning, Tom and family: Your latest missive caused me to sit-up straight (my mom would be proud). You pondered aloud if we’d reached peak gold after chats with a barber and a tire repair man.

I bought my first gold in 1966 and continued buying all through the 1970s. Then, in January, 1980, five other business associates and I (all financial advisors) were having lunch when the waitress asked our profession. She then volunteered that she’d just taken a $10,000 second mortgage on her home and invested in gold. After she left our table, I said, “Guys – it’s time to get out!” I personally sold out that afternoon.

One week later, gold prices collapsed and continued falling for the next 20 years. So you just scared the bejesus out of me with the barber and mechanic comments.

Tom’s response: We are nowhere near the peak in gold yet. The next leg of the bull market is just getting started…

Another offers the Dyson family a place to stay in Colorado… and another asks about Tom’s Portfolio plays… and rising commodities prices…

Reader comment: Hello Dyson Family! I love to read your Postcards From the Fringe every morning before I make my options trades! We are a family of five living and farming on just under four acres! If you come through CO, we invite you to stop and stay a night or two! We have a wonderful, man-made, yet all-natural swimming pool for you and the kids! Check us out if you’re so inclined! We’d love to meet you all some day!

Tom’s response: We’d love to stop by! Where are you in Colorado? We’re in southern Colorado at the moment and heading west through Durango…

Reader comment: I enjoy reading your newsletters. Gold is going up, up, but what about other precious metals? Are silver and platinum part of your gold play strategy? Silver to gold is at historical low ratios, even with the rally in silver over the past two months (I’m up 60% in physical silver ETF). What are your thoughts on silver’s continuing rise? And platinum? I think it is cheap. You can’t buy any platinum coins for less than $1,500 these days, which tells me the “market” price is about to shoot up. Your thoughts?

Tom’s response: Commodities, compared to the Dow, are the cheapest they’ve been in a century. And in inflationary times, commodities soar. I think higher inflation and a watered-down dollar is a good bet, so I think all commodities will rise in value by a lot, including the ones you mention. But for my savings, I only like gold and silver because they will be easiest to sell in 10 years (unlike platinum).

Others are thankful for the Postcards… one reader is grateful for Tom’s homeschool suggestions… and one shares his own travel stories…

Reader comment: What has become of the great wanderlust movement of Americans? They’re all sitting at home, fearful of death. What they should be fearful of is the state of the government.

Reader comment: Hi Tom and family. Being traveling since the ’60s… first motorcycle trips and tent camping anywhere and then (after meeting a group of hoedads planting trees) started using converted school buses for long trips. Totally self-contained. Used to bring my family to Alaska every summer to commercial fish and go back to Texas to work the oil fields. Now, I live in Alaska and drive to the lower 48 for the winters and travel. There’s a place now on the internet you can look for camping places that don’t charge. Look up freeroam.app

Reader comment: Tom, Kate and family, thank you very much for replying to the homeschooling question. Much appreciated by my son-in-law and daughter! It will become more and more difficult for you to realize that what you are doing is a good thing. DO NOT waver!

Reader comment: Am vicariously enjoying your travels with your kids. We, too, traveled west with our kids (on a much shorter trip) and enjoyed seeing our beautiful country. Their younger days hold my favorite my memories. There is no way to know what the future will bring financially – or even socially, for that matter. I appreciate your advice and approach. Your emails are always an interesting read.

Reader comment: Enjoyed your pictures and comments on Estes Park. My wife and I lived there for six years and enjoyed our many visits to RMNP. I could tell you many stories about Trail Ridge Road and some of the problems they have opening the road after the winter snows, when sometimes there is 12-15 feet of snow on the road. Also, that they have clocked the wind at 200 mph in the winter at the top, so even if they could keep the road open in the winter, the wind would blow your car off the road. Thanks for the pictures and comments.

Tom’s note: Thank you for your messages! Please keep writing us at [email protected].