US deficit - to increase over 1 trillion in next 10 years

Discussion in 'Bullion Investing' started by Fender Bender, Dec 2, 2017.

  1. Fender Bender

    Fender Bender Member

    Well who knows. Estimates of the current tax law change indicate a big increase in US debt in the coming decade. If the debt only increased 1 trillion would seem small to me.

    How does this affect bullion investing in the coming years?
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  3. sakata

    sakata Devil's Advocate

    It increase something like $10T under Obama and precious metals went way up, then way down, and now are about where there were 8 years ago. So $1T would seem to be insignificant.
  4. green18

    green18 Sweet on Commemorative Coins Supporter

    Let the Chinese pay for it......
    Amos 811 likes this.
  5. myownprivy

    myownprivy Active Member

    A budget deficit is when the government spends more than in brings in through revenue in a year. The national debt is the accumulation of all of those deficits over time.

    The national debt is largely irrelevant so long as the country in question continues to pay interest on that debt to all those who hold it. In the United States' case, the largest shareholders of debt is the American public (through intragovernment borrowing, individuals purchasing bonds, etc.). Very little of the national debt is held outside of the United States. Most countries and people park their safe investments in American debt because of the safety of doing so.

    However, the American public is very misinformed about this issue. Many erroneously believe the national debt is a crisis. That drives purchasing of precious metals, cryptocurrencies, and other fringe alternative investments when people become terrified about their own security.

    If you play your cards right, you can take advantage of the American public's ignorance.
  6. Dave M

    Dave M Francophiliac

    You are mixing up deficits and national debt, two different things.
  7. sakata

    sakata Devil's Advocate

    Ah, yes. Doesn't really make a lot of difference, does it? We will never pay either off anyway.
    Garlicus likes this.
  8. Dave M

    Dave M Francophiliac

    It makes a huge difference, but I fear I would have to get into politics to explain it.
  9. Valentinian

    Valentinian Supporter! Supporter

    The "increase of $1 trillion" we are reading about is not the increase in the national debt over a decade, it is the increase more than it would be without the tax bill. The debt will be going up a lot in the next decade regardless of whether a tax bill does or does not get passed. However, if this one passes it will go up (at least) $1 trillion more than it would otherwise.
    midas1 likes this.
  10. baseball21

    baseball21 Well-Known Member

    There's really no reason to speculate at this point what impact it will or won't have until there's actually a final version which there isn't yet. Both versions will make compromises in the final version. The estimates are crude and are influenced by ideology anyway which is why they vary. There is no way to account for what companies would leave from higher rates leaving you with 0 percent of it like Facebook did as just one of the estimation flaws.

    Either version should have basically no impact on metals. The metals get moved when faith in the stock market and economy as a whole diminishes. With how profitable cryptocurrencies have been even that might not be as significant as before as more people and especially the big money may choose that instead.
  11. Santinidollar

    Santinidollar Supporter! Supporter

    What I’m trying to figure out is the possible effect from a collapse of the cryptocurrencies. Not predicting such — but it is a scenario that I think would be hazardous to ignore.
    Garlicus and Amos 811 like this.
  12. baseball21

    baseball21 Well-Known Member

    Likely depends on how it happens. Is it because of hacking or governments shutting it down or because it’s not the flavor of the month anymore? If it just gets unpopular the cycle probably repeats but as of now Asia seems to want it to exist in some form
  13. chrisild

    chrisild Coin Collector Supporter

    When I saw that thread title, I thought, oh dear. ;) Be aware that this is extremely close to the political debates borderline, and posts that cross that line have been and will be taken out.

  14. Rono

    Rono Senior Member

    Howdy folks,

    Some good points.

    1. Wait until the final tax bill is passed and signed to assume too much.

    2. The national debt is only a problem when people start to think it's a problem and react accordingly. Note that the US $ is backed by the 'good faith . . . ' of the US gov't. Same/same with crypto currencies. They are good so long as people believe they're good. Go back to Lord Keynes when he first floated the concept of deficit spending. Someone asked about 'the long run', to which he responded most eloquently, 'in the long run, we'll all be dead'.

    3. I will disagree with the poster who said very little US debt is held overseas. Perhaps not so much as used to be, but still a very significant amount. And again, this lasts as long as they have faith in our currency and country. Note that I do not see some country holding us hostage over the debt they hold or engaging in some sort of massive dumping. Feh. It would cost them too much.

    4. You will continue to see a rotation out of US debt held overseas as countries further diversify their financial holdings.

    5. And lastly, right now both gold and silver are relatively inexpensive and for those of us stackers who are in the Dollar Cost Averaging purchase camp, times are good.

    and so it goes,


  15. ToughCOINS

    ToughCOINS Dealer Member Moderator

    Actually, the increase in debt this coming decade was already projected to be quite large as, collectively, this nation is unwilling to suck it up and do the right thing. Not accounting for growth of the tax base, the pending tax cut / reform legislation is forecast to add to that projected increase in national debt, albeit less significantly compared to the existing rate of growth of the debt. If growth in the tax base outstrips reductions in the tax rates, it could actually defray the deficit . . . we'll just have to wait and see.

    As for how increasing the national debt affects bullion investing, I presume you're ultimately more interested in how it affects bullion prices than bullion investing.

    If stacking continued at the current pace, that alone would drive higher bullion prices without increasing investment demand. This is especially true as new sources become increasingly challenging to locate and mine, even with the most modern and specialized technologies.

    If the national debt continues to balloon, and faster than growth in the GDP, confidence in our ability to service the debt will continue to wane . . . the basis for renewed interest in metals. If GDP grows faster than the debt, the metals markets will likely suffer at the hands of the equities markets and entrepreneurism.

    By the way, for those who think our debt is "only" $20 trillion, that is just the tangible debt, and does not account for the money borrowed from and not repaid to retirement benefit programs (think Social Security and the Federal Employee Retirement System), which dwarf that $20 trillion by comparison.
    Last edited: Dec 3, 2017
  16. sakata

    sakata Devil's Advocate

    The usually quoted figure is $120 trillion, or about $360,000 per person for every man, woman and child in the country. Interest on that would probably be in excess of $5000 per person before and paying down of that debt, and probably much more than that (I don't know the average interest rate). I don't know that latest figures but I am pretty sure income would not meet that figure even before any tax overhaul.
  17. ToughCOINS

    ToughCOINS Dealer Member Moderator

    $127 trillion if I remember right, and the interest alone would likely amount to about $15k annually for every working age American.
  18. Garlicus

    Garlicus Debt is dumb, cash is king.

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