Obamacare and Your Investments

June 29, 2012

By now everyone knows that the Supreme Court upheld President Obama’s healthcare program, known to many as Obamacare.

This story dominated the news yesterday, which is why we decided to take a step back and wait a day before commenting.

Our interest in Obamacare on these pages is strictly on the basis of its impact on the US economy and financial markets.

Some of that impact is unknowable at this time, but not all of it. We know that Obamacare will fundamentally transform the role of government in the everyday lives of every American. That requires infrastructure. Infrastructure requires people, i.e. bureaucracy.

And therein lies the biggest worry when it comes to Obamacare for investors across America: it’s truly profound fiscal impact on America’s already bleak fiscal condition.

The biggest fundamental factor likely to effect the US investment markets going forward is our huge national debt and ongoing deficits.

As of this writing, according to the National Debt Clock, the US National Debt is closing in on $16 trillion. And each year’s federal budget deficit adds another $1 trillion or more.

These are unsustainable figures. There is simply no way that the US can service this debt without resorting to the printing presses to pay off the debt with dollars cheapened by inflation. The future of the dollar is cooked into the books by our debt situation. The world is already awash in dollars. Printing more will continue to undermine its value.

Obamacare will add immensely to this debt burden. Estimates of the cost of Obamacare since it was conceived to today have gone from less than $700 billion to over $900 billion to now over $1 trillion. Obamacare won’t just transform the role of government in our everyday lives, it will transform our nation’s fiscal condition in ways totally unforeseen until it was dreamt up.

In other words, Obamacare means a much weaker dollar and future high inflation. As a result, investors must deploy assets into investment categories that actually benefit from high inflation and a weaker dollar. Gold is the ideal investment for such a scenario.