Chris Poindexter


Gold prices held their ground overnight and started moving higher in early U.S. trading after Italy managed to jam an austerity budget through parliament.


Gold was up $14.43 to $1,766.55 and silver was up $0.04 to $33.88 after sinking in overseas trading on news the Italians managed to put together the minimum austerity package necessary to keep limping along. 


A bigger question no one seems to be asking is what we’re going to do about the current global debt lifestyle that’s now just how government business is done?  Even financially healthy governments sell bonds to finance some operations and it makes one wonder when the concept of saving up money to pay for improvements disappeared from the global government landscape. 


I call it The Wheel of Debt and it is a fairly modern construct.  Historically, governments would borrow money in times of war to pay for an army, or on a short-term basis for building projects.  Those times were rare and usually temporary.  Today government debt, and the interest payments associated with it, is a permanent feature in most government budgets. 


When you start adding up the interest burden on the economy, the numbers are staggering.  Add to that the interest on consumer debt in the form of mortgages, credit cards, student loans, and business loans and the numbers are both astronomical and unsustainable. 


In the old days when wealth got too concentrated in a few hands and the population was in debt, common folk who got into debt trouble would respond by leaving the cities to escape debtors prison and exist as scavengers and robbers in the surrounding countryside.  When the country got too dangerous, there would be a debt amnesty day when the slates were washed, debts canceled, and the roving gangs invited back into the fold. 


Today computers never forget and debt interest is a permanent part of many budgets.  What this has to do with gold is the effect The Wheel of Debt has on currency.  Countries that get into trouble borrowing money simply print more to make the interest payments.  When many countries are doing the same thing on a permanent basis it becomes a global race to the bottom on currency valuations. 


And therein lies the value of gold and precious metals.  Currency may change, values fluctuate, but precious metals are always going to maintain some relative value in relation to paper currency.  You can take gold to virtually any country on the planet and find somewhere that will exchange it for whatever passes as currency. 


That’s also why you keep part of your wealth in gold and silver in the safe or safe deposit box.  Because no matter how silly the global currency situations gets, and believe me it’s going to get worse before it gets better, you’ll have at least part of your wealth in a buffer against currency losing value.

Chris Poindexter

Chris Poindexter is a senior writer for National Gold Group.