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Understanding U.S. National Debt Key to Those Investing in Gold Today

September 12, 2012180 view(s)

For individuals investing in gold, understanding the economy in the United States along with the history of that economy across time is incredibly beneficial. When buying gold, those who understand the way the economy has grown, its up and down cycles, and how that relates to the gold markets can make better choices.

While Americans have been stockpiling their gold and silver coins ever since the formation of the country itself, today education regarding the nation’s history with debt can be eye-opening for investors. According to a recent article by Susanna Kim of ABC News, there are major turning points in the US history of debt which, when properly understood, can shed a great deal of light on why the country is now looking at a mind-blowing total of more than $16 trillion in debt.

It all starts, noted Kim, with how debt has been handled since the earliest times and as many investing in gold today realize, this began as far back as 1790 when debt first began to be carried by the country - only 14 years after it declared independence from Great Britain. Even during this time period, people knew that buying gold and holding on to it could help them secure their wealth, but doing so was not always legal in the U.S.

In less than 200 years, by 1982, the national debt had hit the $1 trillion mark and it has not slowed down since. When people couldn't hold gold privately, silver coins were often saved to help through times like the Great Depression.

Kim cites expensive wars, such as World War I and World War II, as significant contributors to national debt, the first of these global conflicts causing Congress to put a limit on how high the debt could go and trying to pay some of that debt down by offering Americans 'Liberty Bonds'. Most solutions to trying to control debt have not resulted in any kind of serious or lasting reduction; this is part of the reason that investors often feel better off keeping their investments separate from any one nation's economy.

Defense spending and the cost of wars has not been the only factor pushing up the nation's mounting debt over the years. Another major contributor has been tax cuts such as those seen under administrations like Ronald Reagan, George H.W. Bush and George W. Bush. These, packed atop the expense of social programs such as Medicare and Medicaid have created a lethal combination that continues to drive debt higher with each passing year. The debt ceiling also continues to be raised at fairly regular intervals, painting a very grim picture of the US's economic future. Reagan and Obama are two examples of presidents who have signed legislation increasing the amount the federal government can borrow.

By understanding the course of US debt and its impact on the economy, investors can better see the value of diversifying their portfolio. Analysts have predicted that economic recessions and even full scale collapses are possible. This is why holding precious metals is such a smart move.

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