As I write this about noon on Nov. 4, Americans have completed casting ballots in yesterday’s elections. But the result of who was elected president is not officially settled. It is also not yet clear which party will have a controlling majority in the U.S. Senate.
While some will argue that the ultimate results for president and control of the U.S. Senate as of next January will make a huge difference in the future direction of America, that may not be entirely true.
Instead, past federal, state, and local government actions have already limited the options available to future legislators and bureaucrats.
The top limitation of future government officials will be past massive deficits for loans and the net present value of unfunded liabilities for government employee pensions and retiree health care benefits (including the Social Security, Medicare, and Medicaid programs at the federal level). For instance, the federal government is already more than one hundred trillion dollars in the hole from debt and unfunded liabilities.
Add to that well over another 10 trillion dollars of debts and unfunded liabilities for state and local governments and government school districts.
The Congressional Budget Office projected a $3.1-plus trillion federal budget deficit for the fiscal year ended Sept. 30, 2020. When you add the net present value of increased deficits of the Social Security, Medicare, and Medicaid programs for the period, the total deficit looks to be at least 8 trillion dollars and may well exceed 10 trillion for the year.
Is there any way that those taking office in January are going to reverse such massive deficits? In my opinion that is exceedingly unlikely, since both Democrats and Republicans are clamoring to enact even greater government spending for COVID-19 bailouts and subsidies.
Since governments do not have resources of their own to spend, any expenditures ultimately are paid by the people. They pay for government spending either through 1) higher taxes today and into the future, 2) through greater borrowing today that will require higher future taxes or 3) by inflation of the money supply that reduces the purchasing power of the U.S. dollar.
Higher future budget deficits on top of existing unsustainable debt and unfunded liabilities will accelerate the decline in the value of the U.S. dollar. This will occur whether or not the government of China follows through on its published promise in September to liquidate more than a quarter-trillion dollars of U.S. government debt.
The results of this week’s elections confirm that American citizens and taxpayers are almost all destined to suffer financially, no matter which party wins control of the presidency and the U.S. Senate. Are there any potential winners?
Yes. Gold and silver effectively serve as a report card on the U.S. government, U.S. economy and U.S. dollar. Gold and silver prices almost always rise when there is greater uncertainty about governments, economies and monetary systems.
As a result of this week’s elections, I predict it is almost certain that gold and silver prices will be winners by rising significantly against the U.S. dollar long before the next presidential election. The value of the U.S. dollar has declined about 98 percent against an ounce of gold since then-U.S. President Richard Nixon “temporarily” closed the gold exchange window in August 1971. I expect the dollar to fall much further in the next few years. ◆
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman National Dealer of the Year Award and 2008 Presidential Award winner. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2019), Professional Numismatists Guild, Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at www.1320wils.com).