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Tuesday, May 21, 2019

Gold is Only Life Raft Available to Investors From Sinking Global Currencies

Peter Grosskopf sees gold as only viable choice of protection against coming storm.

gold to protect from sinking global currencies

In a recent note regarding the state of the markets, Peter Grosskopf, CEO of Sprott Inc, likened currencies around the world to a sinking ship. And according to the executive, gold is the only life raft available to investors looking to preserve their wealth.

According to an article on Kitco, given the amount of looming risks, Grosskopf is shocked that investors are still clinging to the waning stock market instead of flocking towards gold. Global debt continues to spiral out of control, with the latest IMF report placing the figure at a staggering $184 trillion.

Domestic investors may be more concerned with U.S. debt, which surpassed $22 trillion not too long ago reports Kitco. Numerous economists have cautioned that a national debt of $24 trillion would mark a point of no return, a warning that was echoed by President Trump himself. Considering the speed at which the debt is expanding, Kitco states the latter figure could likely be reached within a few years' time.

Perhaps even more so than the amount of debt in question, Grosskopf finds governmental response to the issue alarming. For the most part, governments around the world have not only ignored the mounting domestic and global debt, but also continue to entertain loose fiscal policies. The U.S. is on the cusp of reaching a budget deficit of $1 trillion, yet federal spending has only increased in recent times.

Central banks won't be able to sweep the problem under the rug for much longer, said Grosskopf, as a growing number of pension and entitlement programs are placed into question. As has often been the case, Grosskopf believes that central bankers will respond to the issue with even more lax policies.

A prime example of this is the Modern Monetary Theory (MMT), a more intense version of traditional quantitative easing programs. According to Kitco, because of the MMT's populist nature and the promise of easy money, the supposed solution has quickly gained public support. Grosskopf, like most other economists, find the notion of MMT not only unsustainable, but also likely to end up undermining the global economy.

The appeal of MMT to the average person means that the model is being used as a political tool, which Grosskopf believes will expedite the economic avalanche that's already taking place. And while there are a few safe-haven options available, Grosskopf sees gold as only viable choice of protection against the coming storm.

Whereas other havens like government bonds or reserve currencies are highly vulnerable to crises, Kitco states gold is the only asset that has kept its value regardless of the sort of economic downturn unraveling locally or globally.

Grosskopf also reminded investors that gold has acted as a currency for millennia, stating that the metal has a good chance of returning to this role. As the weight of global debt becomes too great and currencies grow shaky, Grosskopf thinks gold will once again become an accepted medium of exchange.

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