Decline of the US Economic and Military Empire and the Rise of Gold
Egon von Greyerz, a gold expert, has highlighted the unsustainable deficits, escalating debt levels, and declining military power that are contributing to the downfall of the US empire. This situation, however, is paving the way for a new era of real money, which is gold.
US Empire's Decline
A thriving empire requires a robust, functioning economy, a stable currency, and a manageable level of debt. Unfortunately, the US no longer meets these criteria. Moreover, the empire should be backed by a powerful military, which is no longer the case for the US, as former Defense Secretary Robert Gates has pointed out in a recent article.
US Military Weakness
Gates has highlighted the unprecedented danger faced by the US due to its inability to produce the weapons it needs in the required time. The army is shrinking, the navy is decommissioning warships faster than new ones can be built, and the Air Force has stagnated in size. The defense industrial base, after decades of neglect, cannot produce major weapon systems in the necessary quantities or the vast quantity of munitions required for a significant power conflict.
US Hegemony on the Verge of Collapse
The US is in a desperate fight to prevent its hegemony from collapsing, leading to unpredictable outcomes. The risk of a significant conflict is much greater if Kamala Harris wins, as she has not committed to ending the war, unlike Trump.
Empire's Destruction
The path to becoming the world's largest economy often involves mismanaging affairs, which is typically the end for all empires. The US debt has grown exponentially from $900 billion in 1981 to $36 trillion today.
Gold's Role
The connection between the US's situation and gold is straightforward. The table started in 1971 when Nixon closed the gold window, marking the start of the final phase of this monetary era. We are now at the beginning of a super-exponential period of growth in debt and inflation.
Higher Interest Rates
A $100 trillion debt implies both high inflation and a high risk of default, leading to much higher rates. No one will hold risky debt with a mere 3-4% yield. Therefore, sustained rate cutting is unlikely. The bond market doesn't believe it either, with the 10-year treasury up 0.6% in the last three weeks.
Higher Gold and Silver Prices
Inflation and money printing mean weaker dollar and weaker currencies in general, which will benefit gold and silver. The world is facing a crisis bigger than anything we have seen in history.
Gold Shortages
There are significant shortages of physical gold. If paper gold buyers one day ask for delivery on a larger scale, the whole Futures and LBMA markets will collapse. They cannot deliver physical gold against the massive amounts of worthless gold paper that they have issued.
Gold Demand Increase
An increase in gold demand, which is inevitable, can only be satisfied by a substantially higher gold price. Higher debt/debts and inflation lead to falling currencies and a higher gold price. In addition, there is a substantial increase in demand from central banks as they swap their dollar reserves for gold.
Gold Buying in the West
Despite gold being up 26% in 2024, both in US dollars and Euros, gold buying in the West is currently absent. Total gold holdings by Funds and ETFs peaked in late 2020 at just over 5,000 tonnes. Today, these funds and ETFs hold just over 3,800 tonnes of gold – 25% less than in 2020 – and the gold price has gone from $1,900 to $2,600, which is up 37%.
BRICS Buying Gold
As dedollarisation continues, BRICS nations will trade in their own currencies with net settlement in gold. This will lead to an increase both in the demand for gold and in gold holdings by the BRICS. Trade barriers in the West will lead to a weaker dollar and euro and more inflation.
Summary
In conclusion, it is advisable to reduce exposure to stocks, sell bonds and invest more in gold and some silver. It is also crucial to look after and help your loved ones, as they will need you, and you will need them in the coming years.
Bottom Line
The downfall of the US economic and military empire and the rise of gold present a complex and thought-provoking situation. What are your thoughts on this matter? Please share this article with your friends and engage in a discussion. You can also sign up for the Daily Briefing, which is delivered every day at 6 pm.
