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Jim Rickards: Only way out of the death/debt trap is gold-assisted inflation

Section: Daily Dispatches

By James Rickards
The Daily Reckoning, Baltimore
Tuesday, February 9, 2021

I've said the U.S. is caught in a debt death trap. Monetary policy won't get us out because the velocity of money, the rate at which money changes hands, is dropping.

Printing more money alone will not change that.

Fiscal policy won't work either because of high debt ratios. At current debt-to-GDP ratios, each additional dollar spent yields less than a dollar of growth. But because it must be borrowed, it does add a dollar to the debt. Debt becomes an actual drag on growth. ...

... Dispatch continues below ...


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There is actually a way out. It's the only solution left, really. And that's inflation.

Deflation increases the real value of debt. With deflation, the value of money increases, making it more burdensome to pay off debt. This is why debtors hate deflation.

And guess who is the world’s largest debtor nation? That’s right, the U.S. ...

The solution is to increase the price of gold in order to change inflationary expectations. That will increase money velocity and get the growth engine running again. The Fed could actually cause inflation in about 15 minutes if it used this method. ...

... For the remainder of the commentary:

https://dailyreckoning.com/the-only-way-out-of-the-death-trap/

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