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According to their own numbers, the U.S. Congress believes the Federal Government’s debt will rise to 90% of Gross Domestic Product by 2020. That means that the Government would need to raise Federal taxes to astronomic levels in order to pay for their reckless spending.
But according to a study put together by W. Kurt Hauser of the Hoover Institution, Federal tax receipts can never capture more than 20% of GDP. That’s because increases in tax rates produce no additional revenue above the 20% mark.
A recent article in The Wall Street Journal explains how this limitation works:
"The tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high–income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect."
So how will the government make up this huge gap in expenditure and revenues? It’s pretty clear that massive inflation — in essence, printing money — will be the only viable alternative to outright default.
That spells a dollar with less and less purchasing power over the next ten years. The only way to profit in a world of currency devaluation is to seek out the safety of physical gold and silver as well as the upside of the relevant gold and silver stocks.
Ian Wyatt, the Chief Investment Strategist at Wyatt Investment Research recently recommended a small North American gold company to his readers. This company has over $20 billion in proven gold reserves, with a market cap of around $200 million. Even if this company only mines 1% of its reserves, it could double its current share price.