Gold Is The Best Currency As World Faces Debt Crisis - Sprott Inc.
(Kitco News) - Investors need to stop focusing on gold’s daily volatility and focus on its long-term potential as nations around the world deal with ballooning debt, according to the CEO of one of the world’s prominent precious metals investment firms.
In a recent interview with Kitco News, Peter Grosskopf, CEO of Sprott Inc., said that it is only a matter of time before general investors turn to gold to preserve their wealth as they lose confidence in global fiat currencies.
Grosskopf explained that gold is the only reliable global currency as countries continue to deal with unstainable debt. According to data from the Washington-based Institute of International Finance, total world debt is hovering near a record at $244 trillion, more than three times the size of the global economy.
For the U.S., in a report last month, the Congressional Budget Office warned that it sees U.S. debt growing by $12 trillion between 2020 and 2029 due to more government spending and weaker economic growth. That is on top of the current deficit of more than $16 trillion.
It’s only a matter of time before general investors see gold as a necessity,” said Grosskopf. “Gold will become a more fungible global currency as consumers lose confidence in the fiat system.”
Grosskopf explained that he sees really only two ways out of this current debt crisis, the first is to drive inflation higher through more easing and the second is financial repression; however, he added that both options ultimately lead to a weaker, debased currency, which will drive gold demand and prices higher.
In this environment, Grosskopf said that it is unlikely that major central banks like the Federal Reserve and the European Central Bank will be raising interest rates this year.
“Mathematically, raising interest rates with record debt levels don’t work,” he said. “The basic financial equation is broken and we see gold as an important hedge.”
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