Dear Friends,

I highly recommend the following brief article particularly whenever you get another Elliot Waver with their gloom and doom forecast for Gold. Not only is the article a stunning read but it also is a road map to the history of gold over the next few years.

The main point of interest is the conclusion drawn by the author (who by the way is a former Treasury Department official under a Democratic President so his argument cannot be dismissed as merely a partisan rant), is that the US is headed for a debt crisis eerily similar to that which erupted in the last year of the Jimmy Carter Administration back in 1979. You will recall that is the year during which gold went on to hit an all time high near the $850 mark.

Note also that the author comes to the same conclusion that we have been stating for years now, namely, that the fiscal condition of the US makes a Dollar crisis almost inevitable unless draconian measures are enacted, which incidentally I might add, will slam the brakes on any nascent economic recovery.

Considering the fact that gold is trading in nominal terms near the $1145 level, which is almost 40% below the all time high CLOSING monthly price of gold when adjusted for inflation, the stage is clearly set for gold to run to heights that many currently would believe are incredulous. However, one must take into account, as the article correctly and clearly sets forth, that the deteriorating condition of the US fiscal condition has no comparison going as far back as record keeping began in the US in 1792. That alone, especially his notes on the fiscal condition of the US as related to WWII are most enlightening.

Print a copy of this article and post it on the wall referring to it often and then understand why we here at this site are so concerned about our future as a nation and why we keep saying that the price retracements in gold are mere blips on the long term radar screen.

Also rest assured that if we know this, so too do the large Central Banks and monetary authorities of the rising economic powerhouses of the East.

Trader Dan

Click chart to enlarge today’s Inflation Adjusted Gold Price chart in PDF format

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FT: U.S. Debt to Hit $20 Trillion in 10 Years
Wednesday, 21 Apr 2010 08:51 PM

While the global financial system remains transfixed by the problems of Greece and several other European countries risking default over their massive debts, the real threat is whether the credit standing and currency stability of the world’s biggest borrower, the US, will be jeopardized by its disastrous outlook on deficits and debt.

That’s the fear raised in a devastating op-ed on the Financial Times website written by Robert Altman, a former deputy US Treasury secretary under President Clinton who is now chairman of Evercore Partner, a leading global advisory and investment firm.

“America’s fiscal picture is even worse than it looks,” Altman writes. “The non-partisan Congressional Budget Office just projected that over 10 years, cumulative deficits will reach $9.7 trillion and federal debt 90 percent of gross domestic product – nearly equal to Italy’s.

“Global capital markets are unlikely to accept that credit erosion,” Altman says. “If they revolt, as in 1979, ugly changes in fiscal and monetary policy will be imposed on Washington. More than Afghanistan or unemployment, this is President Barack Obama’s greatest vulnerability.”

The financial outlook for the United States is frightening. The size of the federal debt jis projected by the CBO to increase by nearly 250 per cent over 10 years, from $7.5 trillion to a whopping $20 trillion.

The only remote comparison to such a debt load in the World War II, a global conflict that killed 50 million people, Altman and other analysts have written.

But there is no real comparison even in the 1940s and 50s for such a rise in indebtedness – nothing remotely like it has occurred since record keeping began in 1792, Altman writes.

“It is so rapid that, by 2020, the Treasury may borrow about $5 trillion per year to refinance maturing debt and raise new money; annual interest payments on those borrowings will exceed all domestic discretionary spending and rival the defense budget,” Altman writes in the Financial Times.

More… ^[2]