Lots of people are comparing today’s gold market to the 1970’s. Gold shot up to nearly $200 per ounce and crashed 9 months later to near $100 an ounce. Of course, gold had an historic rise to $850 per ounce after that wicked pull-back. Some, such as economist Nouriel Roubini, say “the gold rush is over,”and the seventies are not going to repeat. The debt of today is greater by orders of magnitude from the 1970’s, and there is no end in sight. That means gold has only one way to go (in the long term) and that’s up.
We had a national debt of less than $1 trillion when Jimmy Carter left office. Today, it is nearly $17 trillion, and the so-called debt ceiling is going to need to be raised–again. Debt in the U.S government is exploding. So is debt in the rest of the Western World, just look at Europe and Japan.
Derivatives were virtually nonexistent back the 1970’s. Today, the official total of these debt bets is around $700 trillion, and some say it’s more than twice that much. Pensions didn’t have funding problems back then. Today, they are at least $1 trillion dollars in the red. You can say the same thing for student debt—also $1 trillion in the hole.
There are more than $12 trillion paper dollar assets (stocks, bonds and cash) held by foreigners outside the U.S. Meaning, you couldn’t control the selling in a panic. In the 1970’s, the U.S. was a creditor nation. Today, it is the world’s biggest debtor. The U.S. credit was stellar in the 1970’s. Today, it has already suffered its first ever downgrade, and ratings agencies are threatening more.
The manufacturing base was intact back then. Today, it’s been gutted and moved overseas. That is a real wealth generator, and there is no easy way to get that back quickly.
Although some states are better off than they were a few years ago, others such as New York, New Jersey and California are still $1 trillion in the red, combined. We had spending for the Vietnam War, but that pales in comparison to the money printing of QE. The Fed pumped out more than $16 trillion after the 2008 meltdown alone, and it is still pumping $85 billion out each and every month to prop up the economy. This action is what the Fed calls “open-ended.” Some say its QE to infinity because if and when it stops, the market will crash and interest rates will spike. Trillions of new dollars have been created and nothing is fixed. The problem is still so bad the government allows phony accounting. It has done so since 2009.
The economy is so fragile that fraud and crime go unpunished for fear of crashing the economy, this is according to Attorney General Eric Holder. Money laundering for drug cartels, LIBOR rate rigging, securities fraud, foreclosure fraud and naked short selling are a few of the ongoing and unpunished crimes floating the economy. The financial crimes committed in the 1970’s pale in comparison.
In the 1970’s, we had reporters investigating the White House. Today, we have the White House investigating reporters for doing their jobs. What Nixon did in the Watergate break-in is child’s play compared to the Obama Administration’s use of the IRS to target hundreds of groups considered political enemies. Let’s not forget the data collection on millions of Americans by the NSA and the brave souls that lost their lives in Benghazi. Revelations from multiple scandals seem to keep coming. This is, at the very least, a reflection of bad management of USA Inc. and not good for the U.S. dollar.
So, is the gold rush over? Not if you ask China, India, Russia and multiple hedge funds. Can precious metals prices still be suppressed and pushed lower? Yes, but only until the markets cannot or will not deliver physical metal. When that happens, there will be no more selling what you don’t have. It you want to sell 50,000 ounces of gold, you’ll have to produce it. The markets will be “cash only.” Then and only then will you get the true price of gold and silver.
We are a long way from the 1970’s. What is happening now has never happened in all of recorded history. No country has ever been more indebted than the U.S. Money printing has never been a coordinated global event. The risk to a black swan event such as nuclear war has never been greater in human history. So, when will the gold rush be over? The short answer: when there’s world peace and there is trust and integrity in the financial system.
Join Greg Hunter as he explains how we are a long way from the 1970’s.
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.