Debt-No Free Lunches

When it comes to debt there are no free lunches.  All debt has to be satisfied even by governments.  There are three ways to satisfy all debt.  These are:

1. By paying it back

2. For governments–inflating it away

3. For both governments and individuals–outright default.

For the U.S. Government, its debt is increasing far faster than the rate of growth of the economy.   When the level of this debt gets close to or exceeds the level of GDP (gross domestic product), the temptation will be strong for the government (politicians) to inflate it away.  This can happen as early as 2012-13.

Using the monetary printing press to inflate this debt away will be ruinous for the American middle class.  Standards of living will decline.  

This is one reason why gold is increasing in value.    In over 5,000 years of human history gold has served as a substitute for money.