The US government’s officially reported debt stands at about $37 trillion, but legendary investor Rick Rule boldly asserts the real figure, including all off-balance sheet liabilities, is closer to $150 trillion. This captures not just the national debt, but also the net present value of unfunded obligations like Social Security, Medicare, and various pensions. Yes, this is a US story, but don’t make the mistake of thinking NZ isn’t capable of committing the same type of sin over time.
So is the US debt an impossible thing to deal with? Perhaps, and maybe the only realistic outcome is that, like what happened in the 70’s, the US dollar may lose about 75% of its purchasing power over the next decade. Inflation effectively erodes the value of the debt. So if inflation is the strategy, there’s profound implications for investors seeking to preserve capital and protect wealth amid what may be the next major financial reckoning.
“It’s important to understand the arithmetic, not just the narrative”
Rick Rule survived three previous gold bull markets. In 1975, as gold soared past all time highs, it then fell by half. It shook a lot of investors out, but 5 years later it jumped by 8 times. Since 2000, gold has already increased roughly 12-fold, yet the real boom phase is yet to come, driven by escalating concerns over currency debasement and mounting debt. He points to central banks worldwide quietly purchasing about 1,000 tons of gold annually while everyday people hold cash losing about 8% of its purchasing power each year (no, he doesn’t believe the CPI or consumer price index, accurately captures the real rate of inflation). The disconnect points to the importance of gold as a monetary ‘hedge’, or something that goes up, as the purchasing power of our currency declines.
Beyond gold and silver, and given I’m relatively new to investing in uranium myself, I also wanted to pick his brains around his views here. He believes that uranium is poised for success in the next decade (do your own research!). With the global energy transition pushing for cleaner, reliable power sources, uranium stands to benefit from rising demand and constrained supply, making it an attractive speculative opportunity for investors seeking growth beyond traditional equities or bonds. Additionally, he sees innovative changes on the horizon such as tokenised gold, which could revolutionise how money functions in the digital age. Yes, he is aware of Bitcoin, but he believes that merging the security of physical gold with the flexibility of blockchain technology is the winning combo.
So, what does it all mean?
The uncomfortable reality for many is that while we’re told that Treasuries (bonds) and cash are fine to hold, the financial elite and central banks are buying gold at scale. Occasionally, I think it pays to watch what they do, not just what they say. It’s at an early stage in my view, but I believe there’s a growing loss of confidence in fiat currencies (money that has value because government says it has value). We need to invest to build wealth, but for wealth preservation strategies that go beyond conventional wisdom, we need to be a little contrarian. Rick Rule’s perspective, and he’s been involved in the resource sector and precious metals for over half a century, suggests investors ought to urgently diversify with inflation-resistant assets. In his view, it’s a rational response to fiscal recklessness.
If even half of what he said to me in this chat is true, the path ahead likely involves significant dollar depreciation in the coming decade. This shouldn’t be viewed as a conspiracy theory, because remember, we’ve seen this before.
KiwiSaver investors are now able to allocate to gold, silver, and uranium (among other things). To learn more about how I work in this space, make a time to chat here.
