Government bonds have a checkered history. In their favor, they built the modern international capitalist system that you know and benefit from today. Working against them is that when they blow up, they take down whole economies and nations.
When the international bond markets first developed, the French investors purchased Dutch bonds while the English investors bought into French bonds. Dutch investors bought their American counterparts’ government bonds. In 1803, one-quarter of all United States’ federal debt lay with Dutch investors. Compare that to the Chinese today who control a mere one-twentieth of American debt.
Then the Dutch cleverly utilized their government bonds to spend well beyond their fiscal ability. They borrowed huge amounts of money in order to pay for everything from infrastructure projects to wars to interest on rising debt levels. It sounds eerily familiar to a certain group of Western nations today.
Yet the global investors of the day continued to purchase Holland’s government paper. They were sure the rock-solid Dutch government (which actually popularized government bonds) would never default. No one cared that by the beginning of the 1800s, the Dutch government spent an eye-watering 68% of all its tax revenues on only debt servicing.
It was 1814 when the unthinkable finally happened. In the last year of the Napoleonic Wars, the Dutch government defaulted. The consequences of this default were absolutely crippling. Historians Ad Van der Woude and An De Vries have estimated that this first well-publicized modern default destroyed from a staggering third to half of the wealth of the Netherlands.
The story today is the same. No one believes that the United States and other heavily indebted Western nations could ever default. Yet this past week, the debt ceiling circus has begun again in the U.S. as the national debt approaches $20 trillion. The $20.1 trillion debt ceiling will force Congress into the once-every other year circus to authorize still further spending.
Back in 2011, the first debt ceiling crisis of epic proportions erupted. The American federal government nearly shut down as the debt ceiling breach occurred, and Congress could not agree on how to proceed. In 2013, the government literally shut down.
By 2015, President Obama and Congress figured they could sidestep the problem at least temporarily by simply suspending the $18.1 trillion debt ceiling in favor of the $20.1 trillion present-day debt ceiling which they are already about to surpass.
The government has done everything they could to keep the debt from topping $20 trillion to prevent yet another debt ceiling charade. They have managed to do this by burning through all of their Federal cash reserves. At the beginning of January 2017, they had a cash balance of around $400 billion.
Not even three months later, it is now just over $30 billion. This means that Google counts a cash reserve of more than twice as much as the United States government today with Google’s over $75 billion. It isn’t about to improve either, with the Federal government routinely “losing” about a trillion dollars per year anymore.
Is Your Retirement Portfolio Protected by Precious Metals Against an Eventual U.S. Debt Default?
The situation is not getting better anytime soon, regardless of who is President. In fiscal 2016, the country’s debt grew by 8.2 percent ($1.4 trillion) at the same time as the United States’ economy only grew by 1.6 percent. Now there is a new multiple trillion dollar infrastructure plan plus soon to be forced bailouts of both Medicare and Social Security trust funds in the cards. No matter how you add it up, the math simply does not work out.
The main question left to answer is how will the U.S. federal government default? Will it be on the citizens, the creditors, or the U.S. dollar? The important answer is however they default, gold will protect you from financial ruin as it has done for other residents of our planet for thousands of years. Click here now to obtain your no-charge and no-obligation Regal Assets’ rollover kit which will arm you with the facts you need to save your retirement assets by a partial diversification to physical gold.