Federal borrowing supports gold and silver supercycle
On April 19th Chrystia Freeland announced the latest Federal budget. A budget that took two bloody years to draft. In all honesty, let me save you the waste of time of ruffling through some 720 pages of crafted rhetoric and get right to it.
The feds are addicted to spending. This federal budget was a lot of expenditures that must be printed and borrowed, and it did not include a roadmap out of this mess.
Trudeau and Freeland are catapulting deficit and debt to levels nobody ever thought imaginable. The red ink in the last year was $354 billion. Next year the gap will still be $154 billion. Six years from now, it will still be roughly $31 billion a year, which is the best-case scenario. If interest rates rise in the meantime (and they will), this gets far worse.
Recall that under Mr. Trudeau, our nation will amass more debt than all of the 22 former prime ministers combined. Being conducted on us sheeple, this science experiment will bring the ratio between federal debt to the economy to 51%. If we add in provincial debt, it's 100%. OUCH!!!!!
New spending is $101 billion. A big lump of that is for childcare which will add $8 billion a year in new, forever, program spending. That is in addition to the $24 billion a year currently sent to parents, so you can guess where the Liberal "federalies" are looking for support.
Where is this money supposed to come from? MORE Borrowing, not taxes.
The budget had no capital gains tax increase, no GST hike, no new tax bracket for the rich, no wealth tax and no jump in corporate taxes. There was nothing but the previously announced hits on digital platforms and the luxury car/boat tax, which at best is so futile.
But the best of all of this federal budget announcement was the complete lack of anything substantial outside of the 1% foreign-owner tax we heard about long ago – before the foreigners bailed out to cool off the bubble in the real estate market that has made homes unaffordable for so many.
Too bad, children. Not only do you inherit a plump trillion in debt, but you get to rent forever or move to Kapuskasing and raise llamas. Oh, by the way, the feds are giving $40,000 interest-free loans to homeowners in yet another green retrofit program worth over $4 billion. Yay!!!!!
From this, we can conclude that the housing market runs hotter. We can also presume that your financial portfolio grows bigger and that the wealth divide expands (There could be worse things if you are currently among the astute who are situated in hard assets and protected). The Liberals will buy many votes with this budget, that is for sure, and an election won't be long now, another certainty. But what happens to gold and silver?
Perhaps the better question is not asking what the direct relationship is but whether the mainstream should be more active in their diversification of wealth, knowing we are dangling our economy on the thinnest of rope?
The answer to this is an astounding yes! We are about to venture into the land of the unknown. This unknown land is a violent, sadistic place where dreams are made and broken in the flick of an eyelash.
This kind of printing regime cannot hope to accomplish stability, support and growth all in one go, but we are now overtly timid when asking why. There is no roadmap out of this without tangible assets, in my honest opinion. So, while I appreciate and support the ownership and investment in land, housing if you can afford it, and other aspects of wealth such as our traditional baskets of stocks, bonds and cash, I ultimately believe people have to consider the risk. Opening your eyes to other liquid hard assets such as gold and silver is smart. It is common sense. It is private.
In other words, we are no longer going to move forward and get the same amount of juice from the same squeeze. It is a misnomer to think any other way.
Our debt levels are way too high. A considerable percentage of Canadians are precariously close to bottoming out, and our wealth divide is enormous. From BNN Bloomberg this week: "A new survey by MNP Ltd. has found that 53 percent of respondents said they are $200 or less away from not being able to meet all of their monthly bills and debt obligations."
All of this adds up to uncertainty—the great unknown. And we are not alone. The G20 is living in the same fantasy land where headlines drive thoughts of wealth, happiness and growth of markets and great things related to positive financial outcomes. Still, the reality behind those headlines is that we told only about the jackpot that is won. We are not being told that it took ten times as much to win that jackpot.
Using assets like gold or silver keeps your portfolio flexible. It carries risk like all other investments, but it also brings great opportunities as we now enter what is being coined as the "next commodity supercycle" and into a reasonably long period of higher prices in both gold and silver.
Having these metals in your wealth plan and working while you sleep can easily make and maintain wealth long-term, in my opinion. But for those willing to take more risk, the ones who research this deeper and understand the potential, it could mean a shot at extraordinary wealth growth. This is the kind of wealth increase we witnessed in the 1970s when the price of silver ran higher by over 3000% in less than nine years, bringing with it the price of gold over 2000% higher in the same timeframe.
If you are willing to consider the idea further, we are always open to a call or discussion via email or phone. As always, do your due diligence and speak to those you trust. Investment, no matter the vehicle, carries with it risks which are not suitable for everyone. Here is this week's radio show. I hope you enjoy it!
Hard Money Podcast and weekly Radio Show with Delta Harbour Assets
Yours to the penny,
Darren V Long
Delta Harbour Assets.