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If you go by the official numbers, the inflation spike of 2022 may feel like a thing of the past. But according to legendary investor Rick Rule — former president and CEO of Sprott U.S. Holdings — the U.S. dollar’s erosion in purchasing power is far from over.
The culprit, he says, is America’s massive and growing debt burden.
“The net present value of off-balance-sheet liabilities, which is to say Medicare, Medicaid, Social Security, federal pensions, military pensions — the net present value of unfunded federal promises in the United States exceeds $100 trillion,” Rule said in a recent interview with Kitco.
While the official U.S. national debt currently stands at $36.22 trillion, some experts estimate that unfunded liabilities are upwards of $70 trillion, pushing the total past $100 trillion.
Rule warns that serving that debt will come at a cost to everyday Americans.
“We will have to allow the purchasing power of the U.S. dollar to decline so that we can honor our nominal debts while not honoring our real debts,” he explained in the interview. “I believe because of this $100 trillion in unfunded entitlement liabilities, that the U.S. dollar will lose 75% of its purchasing power over 10 years.”
It’s a stark outlook — but not without precedent. Rule pointed to the dollar’s steep decline in the 1970s as an example of how quickly purchasing power can evaporate.
After all, $100 in 2025 has the same purchasing power as just $12.05 in 1970, according to the Federal Reserve Bank of Minneapolis inflation calculator.
If Rule’s prediction of a 75% drop in the U.S. dollar’s purchasing power over the next decade proves accurate, it could mean serious trouble for anyone holding the greenback. So what does he rely on?
“I maintain liquidity in things like the U.S. dollar and the Canadian dollar — I save in gold,” he told Kitco.
Gold has served as a store of value for thousands of years — and for good reason. Unlike fiat currencies, the precious metal can’t be printed at will by central banks, making it a natural hedge against inflation and currency devaluation.
Over the past 12 months, gold prices have surged by more than 40%. But Rule believes that’s just the beginning, given how much real value the dollar is expected to lose.
“I believe that over the next 10 years, gold’s appreciation, at least in nominal terms, will mirror the devaluation of the purchasing power of the U.S. dollar,” he said. “I don’t own gold because I hope it’ll go to $3,500, I own gold because I’m afraid it’ll go to $12,000.”
Considering where gold is trading today, $12,000 would represent a potential upside of roughly 250%.
Rule isn’t alone in turning to gold as a safeguard. Ray Dalio, founder of Bridgewater Associates — the world’s largest hedge fund — also sees it as a key component of a resilient portfolio.
“People don’t have, typically, an adequate amount of gold in their portfolio,” he told CNBC earlier this year. “When bad times come, gold is a very effective diversifier.”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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