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U.S. at risk of insolvency from higher yields; these assets would be 'destroyed' - Michael Gentile

Kitco News

The U.S. government is now so heavily indebted, that if interest rates continue to climb up, interest expenses alone could bankrupt the Treasury, said Michael Gentile, strategic investor and board member on several gold mining companies.

"If you take the $30 trillion of debt that [the U.S. government] has now, assuming rates go to 5%, which is not a crazy number historically on a 100 year perspective, that would be $1.5 trillion of interest expense, which would be 50% of their revenues, up from 10% of their revenues. So quite simply, they'd be completely insolvent at that level of interest rates," Gentile said, adding that the same apples to the other G7 countries.

The government’s main option is to create inflation and pay back debts with artificially devalued dollars, Gentile said.

“If they take the hard line and don’t inflate, don’t suppress rates, they’re not going to be able to pay back their debts,” he said. “I would not buy any sovereign debt yielding zero to one percent. You’re getting no return with all the risk.”

On gold, Gentile said that he is “contrarian” by nature, meaning that he would invest in a trade that the general public does not like, and would take profits once it becomes too crowded. Gold, currently, has very bearish sentiments from the generalist investor space.

“The crypto space is where you’re seeing that kind of activity…the general mainstream is not adopting gold. If anything, they’re avoiding it these days,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.