“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome should become bankrupt. People must again learn to work, instead of living on public assistance.” What do you make of this quote? Can the U.S. fiscal policy have an impact on precious metals prices?
Although it is attributed to Cicero (55BC), it is most likely a fake one. In a letter to The Chicago Tribune (20 April 1971), John H. Collins, Professor of History at Northern Illinois University, reported that the above-mentioned quote actually originated in A Pillar of Iron (1965), Taylor Caldwell's fictionalized account of the life of the senator.
For us, it makes no difference if it is a fake dated 1965, or a legitimate quote from Cicero dated 55BC. What it tells us is that back in 1965 (or even two thousand years earlier), they knew the truth about the proper way to run a country’s budget.
We think that a scenario in which rating agencies downgrade U.S. securities is relatively possible. The US might be eventually downgraded by one or more of the ratings agencies. Keep in mind that the world's largest pension, mutual, and sovereign wealth funds typically mandate investment only in AAA-rated securities. If there is a downgrade of U.S. debt, those funds might face a situation where they must immediately sell off their primary reserve asset. You can imagine the effect of this on world markets. Gold would be the best safe haven for those funds as they look for a place to park their money.
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