Greg Weldon, veteran financial analyst, has caused quite a stir with his recent analyses and forecasts of the current economic situation. In his view the long term bearish pattern in gold has been decisively cracked, marking a major change in the tide of market forces. This change, according to Weldon, stems from a single, persistent factor: uncertainty. His analysis digs into a few major factors. It tackles increasing levels of debt, the depreciation of currency and how gold is evolving into a key investment.
Weldon pinpoints the causes of this uncertainty starting in 2008. At that time, the total debt in the United States was already greater than its Gross Domestic Product (GDP). He sounds an alarm that a crisis has come due. More than $9.3 trillion in debt will mature in the next twelve months, requiring us to refinance an extra $1.4 trillion over the next five months alone. With these challenges growing, Weldon urges investors to own gold as protection against such a crisis, wherever and however that may develop.
The Current Economic Landscape
Weldon sees the state of the economy today as very fragile, mostly due to increasing levels of debt. The cumulative U.S. debt now comes to a terrifying $55 trillion, or 186% of GDP. This kind of statistic underscores a grim cross-sector reality on the fiscal cliff awaiting us. He argues that the situation in which the public pays for its own shortcoming is ludicrous and untenable.
Weaving some thoughtful analysis with rich storytelling, Weldon points to Japan as a perfect “canary in the coal mine.” Last month, one of our biggest national assets suffered a shocking $35 billion collapse in value. This phenomenon may be a harbinger of a larger trend taking shape around the U.S. economy.
“They’ll be buying bonds so fast it’ll make your head spin.” – Greg Weldon
His claim is certainly indicative of the urgency in which we must start to operate with regard to managing our maturing debt. Secondly, the U.S. is getting its own house in order. Meanwhile, lurching punitive sanctions are compelling countries to leave dollar-based systems. This change would be a bigger blow to America’s economic competitiveness on the world stage.
The Role of Gold and Other Currencies
Weldon’s bullish expectations for gold shouldn’t be a surprise, considering today’s economic backdrop. He argues that investors need to recalibrate their portfolios, especially considering the increasing tumult in conventional financial markets, to adapt to this new environment. In urging his constituents to consider owning gold, Weldon helps solidify the role of this precious metal as a hedge against inflation and currency devaluation.
Weldon’s enthusiasm extends beyond gold to a number of other currencies. In particular, he calls out the Polish zloty, Czech koruna, Swedish krona, and Peruvian sol. He suggests that these currencies could provide new vehicles for investors seeking diversification in a world poised on the cusp of rising instability.
Weldon notes silver’s impressive performance. Even with a very strong dollar, silver has held values at or above $27.50 and at times has challenged the $35 level several times. This kind of strength indicates that silver will continue to be a good investment in addition to gold during rough markets.
The Future of Bonds and Digital Assets
Weldon’s sentiments are echoed by financial commentator Jim Grant. He even goes so far as to proclaim that the U.S. has entered a secular bear market for bonds. This development creates new hurdles for investors who depend on fixed-income securities as a predictable income generating asset class.
In fact, Weldon is perhaps best known for his warning of a “tsunami of paper” that was going to drown the U.S. It underscores how dire the situation is. A significant surge in debt issuance is coming in order to cover maturing obligations. Therefore, investors should be ready for significant volatility in bond markets.
Additionally, Weldon points to an increasing unwillingness on the part of investors to finance America’s deficits. As confidence erodes in conventional fiat currencies, digital assets are becoming more popular as alternative sources of value. This change is part of a larger trend with respect to concerns over economic sustainability and the sustainability of our current financial practices.
“debt black hole” – Greg Weldon
Weldon’s analysis sheds clear light on an urgent need for a strategic reevaluation of our investment approaches as uncertainties continue to pile up.