The definition of failure is “the action or state of not functioning.” Today marked a historic day for the United States, symbolic of its grand failure to keep its financial house in order. The United States national debt surpassed $20 trillion today – an unfathomable amount of cash. That is a greater sum than the entire U.S. economy produces on an annualized basis (roughly $18.5 trillion in 2016 for those wondering).
Aside from the fact there is no possibility of the U.S. government ever paying its debt back without hyperinflation; there are other disconcerting aspects to the United States national debt…
How the United States’ $20 Trillion Debt Will Impact the Country
For starters, no matter which political party is in power, Democrats or Republicans, it’s the same story: the Treasury Secretary threatens Congress to raise the debt ceiling or prepare for complete and utter chaos. We saw Paulson do it under Bush, Geithner and Jack Lew when Obama was in power, and now Steve Mnuchin under Trump. No party wants to stop the madness of America taking on more debt every year because it would be political suicide (I’ll explain why in my next point). Regrettably, this inaction and lack of bravery to do what is right for the long-term of the country puts the entire populations’ quality of life in jeopardy for generations to come.
Secondly, there has been no progress in paying down the United States national debt in twenty years! Imagine taking on more household debt every year, not for a mortgage, but for the bare necessities like food, water, electricity and so forth. That is what America is essentially doing… going deeper into debt to pay for programs such as health care and social security, defense and interest on the national debt! In fact, those line items account for roughly 90% of annual expenses for the government! The growing debt isn’t due to one-off purchases such as a national infrastructure rebuild (which Trump has also promised). These expenses are due every year and continue to grow in size with the country’s aging population.
Third, America will inevitably lose its standing as the world power. It’s tough to deal from strength at the bargaining table when you owe hundreds of billions to those sitting across the table. It’s also nearly impossible for future U.S. presidents not to be influenced by international players on American domestic policies when they are indebted to those actors (in many cases nations who don’t have the American people’s interest in mind).
Lastly, the national debt is growing at a clip which dwarfs GDP growth. The United States national debt in the last fiscal year for the U.S. government expanded nearly 8%, while GDP ticked up roughly 2%… scary.
The United States National Debt Will Have Dire Consequences
America is in the middle of a systemic economic crisis – the entire system as it exists today is failing. And make no mistake, growing debt inevitably crushes the debtor. It happens every day on Main Street and has happened to economic powers throughout history. There is no way out for America. Although better than most Obama years, the United States is running a $560 billion deficit in the first ten months of this government fiscal year.
The United States’ national debt hitting $20 trillion today serves as an ominous warning to investors. Either the U.S. dollar will cease to be the world’s reserve currency, or the country will experience major inflation. Either way, the future looks grim for the United States’ financial standing. And that’s good for gold.
In touch,
Aaron
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