How Will The Election Outcome Impact Precious Metals?

Guest Post By Clint Siegner, Originally Published at Money Metals Exchange

Metals investors wonder what this presidential election will mean for gold and silver markets. Since Nixon closed the gold window in 1971 and the years of price inflation that followed, presidents have largely ignored gold, the Federal Reserve, and other issues related to sound money. Today, the devaluation of the Federal Reserve Note – the explosion of debt and the eternal deficits which enrich bankers and the political class at the expense of the rest of us – is getting harder to ignore.

The looming national bankruptcy coincides with this year’s extraordinarily divisive election. Regardless of which candidate wins, the Washington DC establishment has already lost a great deal of legitimacy. Polls show well over half of the population will not support the victor. As the trust and prestige of our Federal government fades, the potential for social unrest and even wrenching change in governance and policy is on the rise.

That represents a wildcard for gold and silver markets which is impossible to predict. We can only say history shows gold and silver as key assets during periods of upheaval. If crisis is coming in the next presidential term, the people holding physical metal will almost certainly be glad they did.

We can find very little reason to expect either candidate will fundamentally change the country’s fiscal or monetary outlook.

For starters, it’s important not to put too much faith in what any president can do. Congress has final responsibility for spending and debt. No one is seriously predicting a transformation in that “august” body any time soon. You can expect the status quo. The next Congress will remain beholden to the deep state, and unaccountable otherwise.

Neither presidential candidate is making any sort of promise to address the basic problems of too much debt and crushing entitlement commitments – Social Security, Medicare, Medicaid, etc.

Hillary Clinton is nothing if not perfectly predictable with regards to the policies she will promote. Count on more of the same:

Donald Trump has made a lot of hay campaigning as an agent of change. But he isn’t making any bold promises to dramatically reduce spending and entitlements. He intends to increase military spending as well as infrastructure spending, both of which will invariably increase government debt.

He wants Americans to believe he can promote enough economic growth to make these burdens bearable. Is there anyone who still believes this tired old political promise after hearing it repeatedly for all these decades?

For anyone who does, we suggest taking a look at the many good arguments about why we’re past the point of no return when it comes to avoiding a debt crisis.

One problem (among others) with the notion of growing our way out of the predicament we’re in is that higher rates of growth could be accompanied by much higher interest rates. Do the math on what happens to the federal budget when interest rates return to levels closer to what we had in the 90’s. It isn’t pretty. Borrowing costs of 5% translate to an interest expense of a trillion dollars per year.

Tax receipts will need to grow enough to wipe out the current deficits, plus cover the additional borrowing expense. Growing our way out of the current mess is impossible.

For those who want to still believe the federal debt is manageable if the U.S. can expand GDP, we’d point out strong growth does not necessarily translate to reduced debt.

Just look back at the Ronald Reagan years and the Bill Clinton years – both periods known for economic growth.

There is a limit somewhere when it comes to the size of the obligations our government can service. Even optimists should admit the U.S. is currently on a one-way road to financial ruin.

A default is coming – almost certainly via massive devaluation of the dollar.

This election is the most fascinating we’ve ever witnessed. But the fundamental drivers behind precious metals go far beyond the office of president. That is why you should expect prices to be dramatically higher 4 years from now, regardless of what happens at the ballot box in three weeks.

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

Thanks to Money Metals Exchange!

 

Review:

 

“We can find very little reason to expect either candidate will fundamentally change the country’s fiscal or monetary outlook.”

 

Another way of saying it is that changing Captains on the Titanic after it hit the iceberg would not have made any difference.  The Titanic was overwhelmed by water surging into the ship.  Our economy is overwhelmed by debt and …

“There is a limit somewhere when it comes to the size of the obligations our government can service. Even optimists should admit the U.S. is currently on a one-way road to financial ruin.

A default is coming – almost certainly via massive devaluation of the dollar.”

Pick your poison.  Repudiation (unthinkable) or hyperinflation (devastating).  Bet on more wars, more inflation, and more economic insanity.

From macrotrends.net:  A chart showing the ratio of gold prices to the US Monetary Base.  Note that gold, by this measure, is terribly undervalued or the dollar is horribly overvalued.  Hence – expect a devaluation of the buck and higher gold prices in all fiat currencies.

gold-monetary-base-ratio

And debt is increasing exponentially.  This will not end well.

 

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Repeat:

“But the fundamental drivers behind precious metals go far beyond the office of president. That is why you should expect prices to be dramatically higher 4 years from now, regardless of what happens at the ballot box in three weeks.”

 

Gary Christenson

The Deviant Investor

 

 

One thought on “How Will The Election Outcome Impact Precious Metals?

  1. One wonders what exactly was Siegner’s Major in College?

    First, he either totally accepts that the massive corruption and waste in D.C. will continue unabated under a Trump administration, or otherwise simply misses or dismisses it completely.

    Second, he overlooks the fact that our Allies such as NATO, etc., have for decades gotten away with not paying their fair share of defense expenses, and thus have gotten a free ride on the backs of U.S. Citizens, even though Trump has explicitly addressed that, especially concerning Countries such as Saudi Arabia, Germany, Japan & South Korea..

    Third, Trump has addressed the Tax loophole that Wall St Hedge Funds have been exploiting whereby same have gotten away with not paying any taxes on their ill gotten profits whatsoever.

    Simple solution, close all the corporate loopholes and simply reduce the overall rate, whereby it is fair to all, not just to those who can afford the high priced K Street Lobbyists who bribe Congressmen to get favorable tax treatment to their clients, and thus make up the balance by providing favorable tax status for domestic business and production, and less favorable for globalist multinationals trying to exploit the false meme of “Free Trade”.

    It’s easy to criticize when one’s limited IQ or capacity to think outside of the very box/ paradigm which got us into this mess in the first place, and thus tout that it is simply impossible, like airplanes flying, landing on the moon, or that the world isn’t round, because everyone knew that it was flat, right?

    “The looming national bankruptcy”
    LMAO! Right!

    And if it turns out that the Counterfeiting Banksters have their Counterfeit/ Fiat/ Fractional Reserve phony Debt defaulted, dissolved into the same thin air by which it was created, it simply means that prices will finally come back down to Earth, like where they were back in the 1950’s and prior, and people will once again start carrying and using Lawful Money Coins/ Dollars $ as they did before LBJ and Congress got away with letting the Banksters rape everybody.

    Iceland had no problem jailing the Banksters.

    America should have even less trouble when the People finally wake the hell up and get a clue finally.


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