Gold Topping 500 Really is a Big Deal
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Gold Surpassing $500: Why It Matters
Introduction
The recent surge in gold prices, breaking the $500 mark, has made headlines nationwide. Financial programs across radio and TV have highlighted this milestone, noting it as a near two-decade high. However, the real significance of gold reaching $500 seems underappreciated by many.
A Closer Look at Rising Gold Prices
While many outlets treat $500 gold as a fleeting phenomenon, the reality suggests potential for even higher prices before a market correction occurs. This rise isn't just a novelty; it's a warning sign about the financial state of the United States. The increase in gold prices reflects excessive spending in both government and private sectors and significant inflation driven by the Federal Reserve.
The Role of Federal Spending
One major factor contributing to gold's ascent is federal spending. The U.S. government has accumulated over $8 trillion in official debt, up from $6 trillion just three years ago?"a one-third increase in a short span. To put this in perspective, it took 226 years to reach $6 trillion, and only three years to add an extra $2 trillion.
The Privateer estimates that if current spending continues, official debt could reach $11 trillion by the end of President Bush's second term. Off-the-books liabilities, such as Social Security, Medicare, and various pensions, are projected to hit $50 trillion by year's end and may climb to $70 trillion.
The Deficit Spending Issue
The existing debt represents years of deficit spending. This fiscal year's deficit is expected to be $521 billion, with worse on the horizon. The Congressional Budget Office (CBO) highlights that under current policies, annual deficits could soar to $1.164 trillion by 2015. These figures starkly contrast with the administration's projections, which rely on optimistic assumptions about tax cuts ending, conflicts in the Middle East wrapping up, and a drastic reduction in federal expenditure as a share of the economy.
The CBO also warns that by 2013, the U.S. may spend more on debt interest than on all domestic programs combined. This fiscal trajectory is a key factor behind gold's rising price.
Political Inaction
Despite these alarming trends, a resolution to the deficit issue seems distant in Washington. Lawmakers appear oblivious to the gravity of the problem. While Democrats criticize the refusal to roll back tax cuts for the wealthy, they remain silent on similar spending for welfare programs. Regardless of the specifics, the outcome remains unchanged: persistent deficit spending.
Conclusion
Gold exceeding $500 is more than a financial highlight; it's a critical indicator of a nation's economic health. A rising gold price signals an underlying fever, suggesting that the U.S. is more than mildly unwell. Yet, the broader understanding of this signal remains limited.
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