US Debt To GDP Ratio Is Meaningless
The reason for this statement is that the worlds central bankers are locked in a race to the bottom. In other words, they are hell-bent on destroying their currencies. Every nation is looking for a competitive advantage and the easiest way to achieve this is to devalue its currency. Now that we are back on track with lower interest being favoured by every Major developed nation, once can expect this destruction to pick up steam.
Look at the shaded areas; they represent US recessions. From 1965 to 1997 the velocity of money was trending upwards; after that, it has all been downhill. After the 2008 great recession, it just collapsed. The velocity of money is a sign of inflationary forces in action; if it is trending upwards, it means inflationary forces are getting ready to break free.
This chart illustrates why the Fed will be forced to stop raising rates at some point, and eventually start lowering rates again. We are almost at 60 year low, and it would need to trade significantly higher just to get back to where it was in 1960. In simpler terms, the velocity of money is the rate at which people spend money or the rate at which it changes hands. So while the money supply has increased significantly, the velocity of money has only started to trend upwards from the 2nd quarter of 2017, and it is starting from an incredibly low point.
This chart also informs us of the following
The national debt could be increased several magnitudes before the masses start paying attention to it and before the velocity of money has any chance of breaking its long-term downtrend line
The Fed will throw even larger sums of money at the next disaster type event and the recovery time will probably be shorter. Translation the next disaster, when it occurs, will prove to be another once in a lifetime opportunity though the majority despite being given this forewarning will follow the masses and stampede for the exits.
It also informs us that this bull potentially could run so high that even the most ardent of bulls will start to look at it in disbelief
Finally, it explains why Gold bullion has a hard time making any headway for so long, but the small change in direction indicates that Gold might be a few months from putting in a long-term bottom provide it does not close below 1140 on a monthly basis.
Currency wars & US Debt To GDP Ration Relationship?
Until nations actively stop devaluing their currencies to gain a competitive advantage US Debt to GDP ratio is a meaningless statistic to follow. We expect the US to continue adding to its debt load and nothing will be done until this load reaches the 100 trillion mark. You beg to differ, well remember that roughly 100 years ago, we did not even have a 100 million in debt. And then it took off slowly but surely. The masses will need to awaken and challenge their governments and the Fiat money that they are being forced to embrace; until that day arrives, central bankers will continue to devalue their currencies as fast as they can.
Countries engage in currency wars to gain a comparative advantage in international trade. When they devalue their currencies, they make their exports less expensive in foreign markets. Businesses export more, become profitable, and create new jobs. As a result, the country benefits from stronger economic growth.
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