Recent events in Venezuela and subsequent US threats to repeat similar attacks against Mexico, Denmark, and Columbia have intensified talk about global geo-political risk. Many commentators, not unreasonably, cite this as a reason for the high gold price.
The aspect that oftens get overlooked is that war, and war-like military strikes are enormously expensive. When a country has national debts that far exceed GDP, and yearly debt that exceeds tax receipts, all addtional military war-like activities must be financed by more DEBT.
Now, we can speculate that some time, off in the distant future, natural resource income from these strikes will help finance these warlike activities. It may. It may not. Just as the over 600 bombing runs in seven countries we have conducted this year, may or may not bring strategic dividends, but they bring in no money and cost hundreds of billions of dollars.
In the short and medium term - over the next several years - we are adding these many hundreds of billions to a debt burden that is already a tremendous national security threat.
How so?
Because the more warlike the activity, it is ever less likely that our one-time allies - many of whom are now under either implied or direct threat - are ever less likely to participate in our debt auctions. This goes too for rivals/enemies like China, who only a few short years ago was the principal purchaser of our debt.
Especially now that our debt itself has been weaponized through confiscations, sanctions and tarrifs.
Who does that leave to buy our ever-spiraling debt?
US banks, who are subsidized in their purchaes by the FED. This is non-QE QE. And the Fed buying the debt directly. This is QE.
All of which is tremendously inflationary. Especially since nobody will buy our long dated debt so we have to issue all of our debt at the very short end - which is just like printing cash.
This is what is being referred to as the debasement trade. War is an accelerant.
The disrupted supply lines resulting from the war-like activity activity are also inflationary. Even if we predict that some time in the distant future some commodities may be cheaper because of our actions.
Unfortunately this most dramatic national security threat seems to be unrecognized by our government. And by most US citizens. Everyone is aware of the crippling inflation (or 'cost-of living' as inflation is now a forbidden word.) " But not one in man in a million is able to diagnose" the casuse: John Maynard Keynes.
It is, however not lost on the Central Banks of the global economy. That is why the price of gold, silver, copper, platinum and agricultural commodities continues to rise and rise and rise.
This debt is our greatest national security and geopolitical risk, the price of these commodities will continue to rise and rise and rise.
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