Weekly Update from RLA Tax and Wealth Advisory

By:  Dennis Tubbergen

Is This the “History Repeats Itself” Principle in Action?

         This commentary was inspired by an article recently written by Nick Giambruno, published on “International Man”.  (Source:  https://internationalman.com/articles/americas-sixth-default-is-coming-what-it-means-for-gold-and-your-wealth/). I’d encourage you to follow the link and read the entire piece.

         Giambruno offers an interesting and accurate perspective on the US Government defaulting on debt, suggesting that the next debt default will be the sixth default in US history. 

         Keep in mind, a default doesn’t necessarily mean an outright default.  The US Government has never told a creditor, “You’re not getting paid”; however, the US Government has changed the payback terms without the permission of the lender five times in US history.

         After the War of 1812, the government established the Second National Bank of the United States, a central bank that was empowered to create currency out of thin air in order to create currency to make interest payments on bonds that were issued to finance the war effort.  The end result for investors who held US Government debt was that they were repaid in US Dollars that bought less than the US Dollars that were borrowed.  This is a repeating event that has allowed the US Government to “borrow in dollars and repay in dimes”. 

         At the time of the Civil War, this ‘devaluation default’ was utilized again.  President Lincoln and Congress changed banking laws to allow banks to issue currency provided the bank had gold, silver, or US Government debt to back the created currency.  (As an aside, this is what the recently enacted “Genius Act” does.  The only difference is that the currency created now is digital in the form of a cryptocurrency called a Stablecoin.)

         In 1933, President Franklin Roosevelt made it illegal for American citizens to own gold.  At the time, Federal Reserve Notes were fully redeemable for gold at a rate of $20 per ounce.  By eliminating that fixed link between the US Dollar and gold, there was no restriction on the amount of currency that could be created by the Federal Reserve.  Once again, the ‘devaluation default’ principle is in action.

         Until 1968, silver certificates circulated.  Like the Federal Reserve Notes described above, these certificates were redeemable for silver.  That redemption privilege was abandoned in 1968.  With silver certificates going the way of the dinosaur, currency could be created, and the devaluation default could be used.

         In 1971, just a few years later, the link between the US Dollar and gold was eliminated for foreign holders of US Dollar-denominated assets.  While American citizens could still not legally own gold, foreign investors could redeem their US Dollars for gold from 1944 to the elimination of the redemption privilege in 1971.  This move made the US Dollar a pure fiat currency and allowed for unlimited currency creation.

         That’s five times in history that the US has utilized the devaluation default.

         The US is using it again now, as evidenced by the performance of gold and silver over the past five years.  And, now, there is increasing political pressure to further loosen monetary policy.  This will simply accelerate the rate at which the devaluation default occurs.

         If you’re planning for retirement or developing an income model for the future, this should be a top factor in making your portfolio allocation decisions.

Problems in the Banking System Continue to Come to Light

         On October 16, the Federal Reserve Bank of New York injected $8.35 billion into the financial system via a Repo operation.  (Source:  https://rubino.substack.com/p/the-us-quietly-bails-out-its-banks)

         If you’re not familiar with the Repo market, a bank that needs liquidity pledges assets to the Fed in exchange for an overnight loan, usually used to allow the bank to meet minimum reserve requirements.  Normally, banks would pledge US Treasuries as collateral, but in this case, 80% of the assets pledged were mortgage-backed securities.  

         That’s likely a sign that banks are running out of liquidity.  The Fed must know it too – they announced a $491.65 billion standing repo facility later that same day.

         That’s about a half trillion in emergency overnight lending that is now available.

         Do you know the safety ratings of your bank?

National Debt Now Exceeds $38 Trillion

         It didn’t take long.  Only 71 days after the official US national debt hit $37 trillion, it touched $38 trillion.  (Source:  https://www.moneymetals.com/news/2025/10/23/in-the-blink-of-an-eye-the-national-debt-exceeds-38-trillion-004434)

         The national debt of the United States hit $34 trillion in January 2024.  By November 2024, it eclipsed the $35 trillion mark.  It took 188 days for the debt to grow from $35 trillion to $36 trillion.  It took 265 days to increase from $36 trillion to $37 trillion.  The reason for the slower growth from $36 trillion to $37 trillion wasn’t because spending slowed or tax revenues increased.  The slower growth in the debt is attributable to the US Government hitting its debt ceiling and not being able to borrow money until the “One Big Beautiful Bill Act” raised the debt ceiling by $5 trillion.

         When the bill was passed, the national debt stood at $36.2 trillion.  It took less than two months for the government to borrow $800 billion, which saw the national debt exceed $37 trillion.

         Now, slightly more than two months later, we find ourselves at $38 trillion.

         The problem, of course, is spending.  In the 2025 fiscal year, the US Government spent over $7 trillion, an increase of more than 4% over the prior year.

         Now that transfer payments and interest on the debt exceed $6 trillion annually, the rate of growth of the debt will continue to accelerate.  That has to mean more currency devaluation in my view.

         Now is the time to adjust your portfolio holdings accordingly.

RLA Radio

The RLA radio program this week features an interview that I did with Mr. Gerald Celente of “Trends Journal”.  The program is posted and available by clicking on the "Podcast" tab at the top of this page.

Quote of the Week

“Any fool can criticize, condemn, and complain, and most fools do.”

                                                        -Dale Carnegie