When the US Defaults…
The conversation is certainly changing.
Not so long ago the suggestion that the US might default on its debt was considered slightly reprehensible in mainstream circles.
But we noticed an article on Fox Business News the other day from the principal of a Dallas investment firm asking just how an inevitable default should be managed.
Todd Stein writes that the answer may be a “soft default.”
And $10,000 gold.
Here’s what he suggests:
“The Treasury would peg the dollar to gold, oil, natural gas or silver — or perhaps a basket of those commodities. By choosing a weak valuation, for instance, $10,000 per ounce of gold, compared to the current market price of roughly $1,290 per ounce, much of the debt could be paid down thanks to a much weaker dollar.”
The soft default he describes is the rough equivalent of a massive devaluation of the dollar. It is a recognition of US insolvency.
A soft default is the least bad of bad options. The alternative is a hard default, the State’s repudiation of all or most of its debt.
“To be clear, a soft default isn’t a good idea., writes Stein. “It certainly isn’t moral. It’d hurt everyone who socked away money in bonds, certificates of deposit or savings accounts.”
“But realistically, a default of some kind will happen anyway — simply put, the debt load isn’t sustainable.”
The governing classes, and their fiscal and monetary officials have put this country and the American people between a rock and a hard place.
But it’s good to see the curtain being pulled back on their malperformance. It’s good to see the conversation changing.
But we also think it is good idea to get out of the way before dollar holders are victimized by either a de facto devaluation or a default.
Owning gold is the best way to do that.
Before it is $10,000.