It is the same thing that has occurred repeatedly throughout history. Governments spend more than they can afford. Sometimes it is to build pyramids or stately pleasure palaces like Versailles and other extravagant spending for opulent living by officialdom at the people’s expense. Sometimes it is as simple as trying to buy the crowd’s allegiance with bread and circuses or other giveaways. And sometimes it is for costly wars.
It can even be for some or all of those things at once. Clearly, LBJ’s guns and butter policy in the 1960s is an example. The combination of the Vietnam War spending spikes and the social spending hikes of the Great Society led directly to the inflation of the 1970s, with its runaway gold and silver bull markets.
Deficits, the shortfall between tax receipts, the revenue the government takes in, and the amount it spends, widen. Borrowing and money printing are called upon to fill the gap. The debt grows to unsustainable levels, while the money printed to sustain spending depreciates the currency.
It is an old pattern, one visible in antiquity, in developing nations, and even in modern industrial nations.
With that said, we think it is time to look at Washington’s financial picture.
Washington’s Spending, Borrowing, and Debt
March 31 marked the end of the first half of the government’s Fiscal Year 2023, and it is one for the books. During the six-month period, the federal government collected $2,048,196,000,000 in taxes. That is a lot. In fact, it was the second-highest October-March tax collection in history.
Not so long ago, during George W. Bush’s first term, the $2 trillion the government collected in those six months would have been enough to fund the government for an entire year. But in 2023, it wasn’t enough to cover six months of spending. Washington actually spent a lot more than that during the first half of the fiscal year, at $3,148,900,000,000.
So, Washington ran a six-month deficit of $1.1 trillion. Stated differently, the U.S. is borrowing an enormous $6 billion a day!
With that kind of borrowing, it is no surprise that the national debt has now climbed to $32.6 trillion. That is 121% of the entire economic output of the nation (GDP). You might compare that to having credit card debt greater than your annual income.
But even that is not a good comparison, because while your income is your own, America’s GDP does not belong to the government. It is the property of the people who produce the wealth—each of whom has expenses and debts of his own.
A Deeper Look at US Debt
Another way to express the runaway size of the U.S. national debt is to point out that it is equal to about $95,000 per citizen or $380,000 for a family of four.
That understates the problem because of a category of government promises that are not adequately funded—promises like Social Security.
These off-the-books debts, called “unfunded liabilities,” amount to $558,000 per citizen or $2,232,000 for a family of four. Where will you get the money to pay your share? Or even to pay the interest on your share of these massive federal debts?
These inescapable financial realities will have to be confronted as we enter what promises to be a volatile debate about raising the national debt ceiling in the next few months. The debt ceiling will doubtlessly be raised, but as it is, the prospect that Washington’s debts can only be paid by inflation will come into sharp focus.
That is why more and more dollar holders, both individuals and foreign governments, are eyeing the dollar skeptically and acquiring gold instead. Because unsustainable debt leads to inflation. It is the ideal fuel for gold bull markets.
If you’re interested in investing in precious metals, let us provide you with a free one-on-one consultation.
Red Rock Disclaimer
The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment or tax advice, and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.