I know, I know – it’s not a startup topic. And its that old-school dinosaur gold. But I feel that there is a fundamental and mathematical disconnect between two things: the current market pricing of the US Dollar & Treasury bonds, VS. what the math is telling me will happen. This is similar to my math posts on startup fundamentals and stock prices.
I recommend going through the slides below in full screen so you can follow the math and arguments better. This is a draft and work-in-progress.
In a nutshell, the arguments are:
- Large countries, even the US, UK and Germany, have defaulted before. Nobody is immune to bad public finances.
- Current levels of debt-to-revenues are already past the point-of-no-return when viewed against 200 years of data on defaulting countries.
- More than a 85% probability that the US will default when using official government debt numbers ($15tn). 100% Probability when including unfunded liabilities and off-balance sheet items.
- International Central Banks of Russia, India, China, Mexico and dozens of other countries have been hoarding up on gold. Yes this is true. Just look at raw data from the IMF. 2009 was the first time in 20 years that Central Banks – as a group – became net buyers of gold. They see this currency crisis coming and are trying to diversify their reserves.
- Between the outcomes of money printing, default, and balancing the budget, the most likely scenario and indeed the one that has played out since 2008 is money printing. The Fed will keep QE3 going on indefinitely.
I believe Peter Schiff, Jim Rogers and others are right in predicting a coming Dollar currency crisis. Can’t say when, but the math says it is inevitable. I am sure of it.
Disclosure: I own positions in precious metals including gold and silver bullion.
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