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<p>[QUOTE=&quot;Smitty, post: 1361732, member: 35044&quot;]Chris,</p><p><br /></p><p>My whole belief in gold is based on the belief that we won&#039;t get ourselves out of this mess. We will take this all the way over the cliff. I hope I&#039;m wrong.</p><p><br /></p><p>I said before that we have three choices; default (won&#039;t happen), cut spending, or print. A meaningful cut to spending means totally revamping SS and Medicare. The politicians would be voted out of office immediately if they did that. They&#039;ll tinker with caps and other minor things to look like they&#039;re doing something, but they won&#039;t cut near-term pay-outs. So we will print.</p><p><br /></p><p>Eventually this will cause interest rates to go up. For each 1% increase in interest rates, which will fully vest in 3-4 years due to roll over of maturing bonds, and given that our debt is expected to be $20 trillion in 2015, the increase in interest payments would be $200 billion per year. Given that the average interest rate over time has been in the 6% neighborhood, if interest rates increased by 4%, back to the 6% area, we would have &quot;additional&quot; interest cost of $800 billion per year. Add to our current interest cost and you&#039;re looking at over 40% of tax revenues going toward interest payments. We simply can&#039;t pay that.</p><p><br /></p><p>However, there is a caveat. Many of the interest payments are to government programs, so they could delay those payments and kick the can further down the road. For how long, I don&#039;t know. But I do know that one day we&#039;ll run out of road.</p><p><br /></p><p>If that&#039;s not bad enough we have the demographic ticking time bomb of the core of baby-boomers retiring in about ten years. That represents a huge increase in SS and Medicare payments. And those are immediate payments that can&#039;t be kicked down the road.</p><p><br /></p><p>So I will hold gold.[/QUOTE]</p><p><br /></p>

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