U.S. Federal Debt Crisis: We're in the Danger Zone with a 125% Debt-to-GDP Ratio
From Surging Deficits to Spiking Interest Rates - How the $24 Trillion Debt Increase Threatens America's Economic Future, Pushing Investors Towards Gold and Bitcoin
I have written about our U.S. federal debt for some time and for at least the last 15 years, sounding the alarm bells on the long-term threat it poses to Americans. Today, we are in the “danger-zone” with our debt-to-GDP ratio at 125%+. Since 2020, our federal debt has surged by 80% while our GDP has grown only 38%; this is not sustainable. Yet, people’s eyes glaze over or they get upset when someone tries to do something to right the ship.
Long-term U.S. debt interest rates have spiked, which reminds me of our pre-2008 financial crisis level. Meanwhile, our government is running an annual deficit of over $2 trillion; some in D.C. are ignoring this crisis even though we are now spending $1 trillion on debt interest alone! Along with this comes the Department of Government Efficiency, which is seeking to find savings for the U.S. Government, and many in the nation are getting upset and needlessly politicizing it. They’ll be more upset if we end up like 2020 Argentina as DOGE works to reverse this decline.
While the U.S. Dollar has surged since the November 2024 presidential election, it has dragged over time in relation to gold and Bitcoin. This shows that the free market is concerned about the long-term life of the U.S. Dollar while favoring better alternatives. After all, the central banks' actions, like buying government debt, continue to lead to our currency’s devaluation and inflation, affecting purchasing power and real returns.
With these rising debt levels, there's a serious shift towards assets like gold and Bitcoin, which are seen as hedges against currency devaluation. Commodities and equities might also serve as stores of value, though with varying risks and benefits.