Lifted from Gold thread:This weeks GoldSilver.com News quote is...

Lifted from Gold thread:

This weeks GoldSilver.com News quote is from Eric Sprott, founder of Sprott Asset Management.

Mr. Sprott founded Sprott Securities, Inc. in 1981 and then the hedge fund and investment company Sprott Asset Management in 2000. One of the reasons for his incredible success has been his ability to make prescient calls about major moves in financial markets including this gold bull market that started in 2001. When he makes predictions, many powerful and wealthy people listen.

The following excerpts are from a recent September 2009 report by Mr. Sprott. The report deals with the US dollar crisis and is entitled “Safe Haven No More”:

So how will this US debt crisis ultimately resolve itself? Let’s consider the options. It would appear from our analysis that the spending ‘promises’ are the crux of the problem now facing the US Government.



US Government Financial Summary Amount
US Revenue for 12 months ended August 31, 2009 $2,157,940,000,000

Obligations4
Total Outstanding US Debt (August 31, 2009) $11,812,870,150,873
Unfunded Social Security Trust Fund $17,500,000,000,000
Unfunded Medicare Trust Funds $89,300,000,000,000

TOTAL Obligations $118,612,870,150,873

4 Richard Fisher, President and CEO of the Federal Reserve Bank of Dallas, is on record stating that unfunded liabilities from Medicare and Social Security totaled $99.2 trillion as of May 2008. The NCPA data above is the most recent estimate available. Fisher’s speech can be retrieved at: http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm



…Because there is little hope of paying for their unfunded liabilities through current tax revenues, the Social Security and Medicare promises will undoubtedly require new bond issues. You probably don’t need a calculator to realize that the US can never cover the debt costs on $118 trillion… What is glaringly obvious is that the United States’ penchant for increasing its ‘promises to spend’ is directly threatening the future viability of the USD. While US politicians brazenly approve future spending promises they forget the real costs those promises imply – and there is no feasible way we can see those promises being paid for under foreseeable economic conditions.

If there isn’t enough new capital in the current environment to fund new Treasury bill issues, then there certainly isn’t enough capital to pay for the US’s unfunded future obligations.

The choices, therefore, are bleak:

1. Default on Medicare promises. (Unlikely given the current debate in Washington to expand medical coverage.)
2. Default on Social Security promises. (Unlikely given the increasing average age of the voting public.)
3. Put forward a credible plan to balance the budget. (Unlikely given the most recent budget projections.)
4. Default on outstanding debt. (Unthinkable)

None of these options are feasible for the US Government. So they realistically only have one option left – to print their way out of their debt crisis.

We keep coming back to the numbers for the US debt, and they don’t add up. Even Alan Greenspan, former Chairman of the Federal Reserve, believes that the rising budget deficits in the United States are “unsustainable”. Because the US Government is printing dollars to fund their liabilities, it is highly unlikely that we will ever see a failed bond auction similar to that of Poland.

The far more likely outcome, therefore, will be a US dollar crisis. It is for this reason that we have positioned our hedge funds and mutual funds so heavily in precious metals. At the end of the day, when the world finally realizes what the US has done to the world reserve currency, international investors will shift into an asset that no government can print. In our opinion the US dollar’s status as a ‘port’ in the financial storm has officially come to an end.




The figures above are difficult to fully absorb. Let’s break the numbers down into a rough everyday example to make it easier to understand.

Simply divide the annual “US Revenue” by the “Total Obligations” = 1.82%.

This is like owing $200,000 on a house and making $3,640 per year at your job!

Unsustainable. You couldn’t pay off the debt unless - magically you got your hands on your very own dollar printing press, then what would YOU do?

Print. Print. Print.



The choice for us was simple. We got Gold and Silver to protect against getting burned from what we see as absolutely inevitable.

Remember “Wealth is not destroyed it is merely transferred”. What side of the transfer do YOU want to be on?

GoldSilver.com