Hoogland: Government Debt Will Rise Rapidly in the Coming Period

Economic headwinds are intensifying rapidly. Rising costs, weakening demand and increasing debt are putting pressure on the economy from multiple angles. According to Jack Hoogland, government debt will rise at an accelerated pace in the coming period, which is highly positive for gold.

Because the US produces its own oil and gas, it is less affected by the energy crisis than most European and Asian countries. However, the ISM Services Index published yesterday already made it clear that the initial impact was felt last month.

In the tweet below, we see that companies are facing rising input costs and that employment has suddenly dropped sharply.

This provides a strong indication that companies are not simply passing on rising input costs to customers, but are instead trying to preserve their profit margins by cutting (personnel) costs. This, of course, leads to rising unemployment.

Key difference between the 2022 energy shock and today

The tweet below highlights the major difference between the 2022 energy shock and the current situation.

In 2022, Covid had just ended and everyone wanted to make up for the ‘damage’ caused by lockdowns, while the average American had even received thousands of dollars in ‘stimulus checks’.

Companies could raise prices without hesitation, as consumers kept spending regardless. Now, households have much less room to absorb price increases, forcing them to cut back.

Government debt rising rapidly

This results in declining profit margins, a weakening labor market, and therefore a stagnating or even contracting economy. It also means that government debt is now increasing due to

1) rising government spending,
2) stagnating or even declining tax revenues, and
3) rising interest expenses.

In other words, pressure is coming from three directions! Government debt will rise rapidly in the coming period, which is extremely positive for gold and silver!

US budget deficit to 7%

In the tweet below, we already see the first indications of this.

PIMCO expects the US budget deficit to rise to as much as 7% of GDP this year. This means that the already excessively high US government debt will increase even faster. 

And as I explained in this short video, as an investor you only need to focus on one thing when it comes to gold.

UBS: Gold to $6200 this summer

In the tweet below, we see that Swiss bank UBS largely expects gold to rise to $6200 in the coming months for that reason.

And if, as I showed you on Thursday, you understand how incredibly profitable gold producers are right now, while their shares are ridiculously cheap…

…then you know how extraordinarily fast gold mining stocks could rise in the coming period.

Jack Hoogland worked at the American Citigroup in Amsterdam, Düsseldorf, Madrid and Brussels as a Financial Analyst, Risk Manager and Finance Director. Jack has followed the financial markets since the late 1980s and increasingly focused on macroeconomics and the financial system after the credit crisis. Read more from Jack Hoogland.