Why Rising Debt Will Lead to $10,000 Gold
Excerpts from a presentation by Nick Barisheff
at the 18th Annual Empire Club Outlook Luncheon,
January 5, 2012 Toronto, Canada

A recent Congressional Budget Office report predicted the US federal government’s publicly held debt would top an unsustainable 101 percent of GDP by 2021. Currently, the official US debt is an astronomical $15 trillion. Yet this is only the current debt. If the US overnment used the same accrual accounting principles that public companies must use, unfunded liabilities like Social Security and Medicare make the real debt more than $120 trillion. This represents over $1 million per axpayer. Obviously, this amount is impossible to repay.

As we remind our clients this is not a typical bull market. Gold is not rising in value, currencies are losing purchasing power against gold, and therefore gold can rise as high as currencies can fall. Since currencies are falling because of increasing debt, gold can rise as high as government debt can grow.



While central banks have been net purchasers of gold since 2009, the real game changers will be the pension funds and insurance funds, which at this point hold only 0.3 percent of their vast assets in gold and mining shares. Continuing losses and growing pension deficits will make it mandatory for them to eventually include gold— the one asset class that is negatively correlated to financial assets such as stocks and bonds. When this happens, there will be a massive shift from over $200-trillion of global financial assets to the less than $2 trillion of privately held bullion.

These events gave me the confidence to title my new book $10,000 Gold. The book connects the many trends that will be directly and indirectly responsible for both the rising debt and the rising gold price over the next five years. It will be published this year.