The US national debt is now over $16 trillion, and growing at the rate of over $1 trillion per year. It cannot be paid off by normal means, which would entail a huge boost in taxes and a brutal slashing of entitlements.
The only way America’s debt can be seriously addressed is to devalue the dollar.
The US owns the world’s largest store of gold. The authorities should unilaterally, overnight raise the price of gold to $10,000 per ounce. Each dollar would now be worth one ten-thousandth of an ounce of gold. This would allow US debt to be paid off with vastly devalued dollars.
This would be inflationary, since everyone who owned gold would own a pile of devalued dollars. The huge increase in the number of dollars would drive up prices, and that would work against the current forces of deflation.
Nations owning gold would in turn devalue their own currencies, and thus be able to pay off their own ‘impossible’ debts. In the end, a new world monetary system would have to be established, but the terrible problem of a planet choking on debt would be resolved.
Russell thinks devaluation is the only way to solve the world’s debt problem. Interestingly, there is much discussion recently of gold re-entering the world monetary system, and that is likely to increase in coming months. Smart, wealthy, well-informed investors will start accumulating gold (Soros and Paulson are doing it already).
Russell believes the US will, in due time, resume backing its currency with gold, and the dollar will be convertible into the yellow metal at around $10,000 per ounce. This will make it the most sought-after currency in the world.
The Chinese are onto the same idea. Right now, China does not own as much gold as it would like, and has rushed headlong into the gold business; it is currently the world’s biggest producer of gold. It is also why China is encouraging its people to buy and accumulate gold. China knows that gold is the future of the world monetary system
To read Richard Russell article: Can Gold Save a Choking Planet?
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