All in all, with risks of higher taxes, healthcare spending, technology regulation, climate change and a festering Trumpian Republican party, America’s reputation is taking a battering. Adding to this concern is that while inflation would be welcomed because it helps solve the government’s finances, the US dollar remains at risk. Although a weaker dollar would help US exports, already the combination of a Democrat government together with expectations of mounting twin deficits has weakened the dollar of late and the greenback has actually fallen 10% from its peak. And as the pandemic accelerates around the world, there is a move away from dollars while America’s dollar obligations keep mounting. We believe that the growing risk of more dollar deterioration could trigger an avalanche of foreign outflows which to date have financed America’s current account deficit. Borrowings more from the future is a recipe for disaster.
Gold is the financial canary in the coal mine. The United States is in decline. Covid-19 is testing the world’s richest healthcare system and has caused a weak economic recovery at a time when there is both income and racial inequalities. The long haul pandemic treatment alone will take up much of President-elect Biden’s first 100 days when there is a need to rebuild trust, restore confidence, tackle the pandemic, and economic recovery. The US has a serious problem with their growing deficits and overvalued dollar. The cure will be painful. For that reason gold is surging, it is a good thing to have, it is the world’s financial vaccine.
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