A USAGOLD CHART STUDY
Toward a better understanding of the U.S. national debt . . .
and its consequences
As of Friday, April 12, 2019, the national debt stood at $22,027,837,127,788.04 – $966 billion higher than a year ago, $2.081 trillion higher than when Donald Trump took office January 20, 2017, and nearly double where it was ten years ago. It is no doubt much higher now than it was then as that is the nature of the national debt. It always grows. It never shrinks. And that has consequences for the country and for you as an investor. “The health of the country, the prosperity we care about, and the security we care about are just inextricably linked,” says former chairman of the Joint Chiefs of Staff Mike Mullen, “. . . and we keep looking away hoping it will get better, and it gets worse. It’s about the debt levels, and the inability to pay our own bills, and if we don’t get our fiscal house in order, it’s going to dramatically affect our security of our country.”
The U.S. federal government added $1.481 trillion to the national debt in 2018, the third largest increase on record. The Republicans do not talk about the deficits because it is an embarrassment. The Democrats do not talk about the deficits because they do not want to draw attention to the uncontrolled spending debt issuance to sponsor government social programs.
According to economists Ken Rogoff and Carmen Rinehart, the established danger zone for the debt to GDP ratio, begins at 90%. The current debt to GDP ratio for the United States is 106%.
This quarterly chart zeroes-in on why the national debt matters. Elevated interest rates and massive growth in the gross debt will push federal government interest expense much higher – so much so that it could exceed in the near future what the nation spends on national defense. One would think that, like Italy or Greece, the level of debt and interest payments will affect the national credit rating at some point. Last, please note the acceleration in debt payments over the last twelve months (the last bar represents Q4-2018).
This chart depicts U.S. government receipts and expenditures from 1950 to present. Note the growing gap between incoming and outgoing – the difference for the most part filled by additions to the national debt. Given the established trend, that gap in all likelihood would have continued widening even without the imposition of the new tax reduction program. With tax reductions now in place, the distance between the two lines is likely to widen even further.
National security advisor John Bolton recently focused attention on the national debt saying that it was “a threat to the society.” The national debt now stands at over $22 trillion and nearly $1.5 trillion was added in 2018. “And that kind of threat,” he added, “ultimately has a national security consequence for it.” An obvious consequence is that interest payments eat up what might otherwise be spent on the national defense. Perhaps that is what has Mr. Bolton worried. As you can see in this final chart of our series on the national debt, there is a strong relationship between growth in the national debt and gold – one that goes all the way back to the early 1970s.
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