The news coming out of Argentina these days certainly gives you pause for thought. The current inflation rate is 42 percent. Compared to Venezuela’s hyperinflation, that is nothing. Economists have opined that it is simpler to learn from a national economy in dire trouble than your own economy that at least on the surface (according to all of the major media news outlets) appears to be going stronger and better than ever.
The truth about the American economy though is more complex and a little sad. The United States reached its final economic peak back in the decade of the 1970‘s. Some analysts and economists have claimed it was earlier than this back in the 1950’s, but the early ’70’s were the last great, glorious moment.
At that time, the two main superpower rivals with the U.S., Russia and China, were collapsing under the weight of their own ponderous and inefficient command economies. Meanwhile, the United States still sometimes enjoyed balanced budgets, maintained a residual admiration for free enterprise and hard work, and had money still officially backed by gold.
That all changed for the worse when U.S. President Nixon had his hand forced and cut the last backing of the dollar by the greatest precious metal. The era of ultimate currency debasement began on that date in August 1971. Gold prices that year ranged from $38 to $44 per ounce, as this chart below clearly shows:
With gold today in the reliable neighborhood of over $1,200 USD per ounce, the dollar has since depreciated by 96.3 percent of its value against that same ounce of gold. Now that is what you call currency devaluation and inflation!
How did we get to this point? In the 1970’s the cracks in the fiction of American public and private finances were already materializing. Growth was in decline. Regulation, bureaucracy, and costs were steadily growing. Central planning of the American economy was underway. The magic money transition to the great financialization had begun.
Under the two-term reign of President Ronald Reagan, the national debt skyrocketed from a mere $900 billion to over $2.8 trillion. This is still the largest single peace time increase in American debt history.
It only grew worse with the Black Monday crash of 1987. Debts and running deficits across all economic sectors became commonplace and increasingly bigger. This was true with not only government but also corporate and consumer segments.
At that point the entire nation began drowning in deficits and debt. But as former Vice President Dick Cheney famously observed back in the day, people came to the conclusion that these “deficits don’t matter.” The government took this notorious declaration to heart. It has never had a true balanced budget in the 30 yeas that followed 1987.
Forbes Magazine recently shook up anyone who was listening with their grim assessment of the American debt situation by stating:
“History shows that beyond a certain level, debt burdens become too heavy to bear. It is not clear what that level might be, when it will happen, or how severe a crisis could get.”
This tragic and dangerous situation does not even take into account the machinations of the Federal Reserve, who have only served to make matters worse with their incessant meddling in the U.S. economy. Beginning back in 1987, the Fed added $4 trillion worth of assets to its balance sheet. The problem is that these were not assets, but a mere printing of magic money that they then infused into the economy in their first of many efforts to re-inflate the burst American financial bubbles.
What did the Fed buy with this magic money, and how did the boost the economy with it, you may ask? They purchased government bonds and allowed the federal government to embark on the largest spending spree in the history of the world.
Is Your Retirement Portfolio Prepared for Argentina-Styled Inflation?
Taken together with the Fed, the top 20 central banks of the globe have boosted their assets (i.e. added magic money into the monetary base of the planet) by an eye-watering 23 separate times in the past 30 years! They have taken the monetary base (of these 20 most important economies) from under a trillion dollars to more than $19 trillion now. They are not finished yet. The base money supply of the world keeps increasing at three times the pace of global GDP.
Now you know where the stock market has obtained its unbelievable gains from (over the past ten years) since the last meltdown caused by the Global Financial Crisis and Great Recession. Never in the entire history of the world has there been such an enormous amount of fake money created to produce such an unbelievable amount of false prosperity for so many individuals who were faked out by it all. Be forewarned; the writing is on the wall.
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