Investing In Gold And Silver For Capital Preservation And Appreciation

America And Japan Debt And Gold

Two expensive wars waged at the same time, a housing bubble leaving innumerable outstanding mortgages and unsold foreclosed houses, the bankruptcy of major banks and here you have the explanation of the staggering 13 trillion dollar American debt, increasing rapidly due to the interest on it.


Two expensive wars waged at the same time, a housing bubble leaving innumerable outstanding mortgages and unsold foreclosed houses, the bankruptcy of major banks and here you have the explanation of the staggering 13 trillion dollar American debt, increasing rapidly due to the interest on it.

If the US still manages to stay afloat is just due to the precious Treasury market that, by having 500 billion dollar-turnover a day, is perceived by the US creditors like China and Japan safe enough to make them continue purchasing the US debt. The US has not only witnessed a trade deficit with Japan, but that country is the second-largest US debt holder after China. While Japan\’s economic interests are clear – allowing Americans to buy Japanese commodities with the money it provides, and keeping the international financial system alive -, Americans are rather afraid that their business relation with Japan will end into an appreciation of the dollar in the detriment of the yen and as such into increasing American interest rates.

The US owes Japan about a quarter of a trillion dollars. The central bank of this country has acquired American treasuries of more than $592 billion. Japan invested also substantially in some bankrupt American banks.

The problem with having Japan as your creditor is that its debt was last year around 10 trillion dollars, and Japan is perceived as a likely defaulter due to its failing economy and continuous deflation. If it is still surviving, that\’s only because it borrows substantially from its citizens that have 7.7 trillion dollar savings in the national banks. But an aging population means a decreasing savings rate. On the other hand, in the likely scenario in which banks raise interest rates and the yen continues to depreciate, people may decide to move their unprofitable accounts to some banks abroad. And we shouldn\’t forget that currently they are in their majority invested in government bonds. If something like this happens, Japan needs financing from abroad, but the higher rates there would make its financial system crash pretty much as that in the US. This because, among others, the Japanese government pension fund (the largest worldwide) is a net seller of these bonds, and the government is already indebted to an important Japanese bank by a stunning $1.7 trillion. In conclusion, the US has all the reasons to feel concerned, given that one of its major creditors has a huge debt itself.

Of course, it could sell a part of its gold bullion bars forming its impressive gold reserves of 262 million ounces. Given the price of gold nowadays, which continues to increase, that could help the country to pay its debt or revitalize the economy.

Consult specialists on purchasing gold bullion bars in times of economic turmoil.

, , , , , , ,