The US government can no longer delay or disguise its impending bankruptcy.
The US federal government has the biggest debt in the history of the world. And it’s continuing to grow at a rapid, unstoppable pace.
First, let me put some crucial numbers and concepts into perspective.
You often hear the media, politicians, and financial analysts casually toss around the word “trillion” without appreciating what it means.
A trillion is a massive, almost unfathomable number.
The human brain has trouble understanding something so huge.
The image below shows stacks of $100 bills and a human for reference.
When politicians carelessly spend and print money measured in the trillions, they are in dangerous territory.
And that is precisely what the fiat currency system has enabled the US government to do.
Today, the US federal debt has gone parabolic and is over $35 TRILLION.
To put that in perspective, if you earned $1 a second 24/7/365—about $31 million per year—it would take over 1,109,080 YEARS to pay off the US federal debt.
And that’s with the unrealistic assumption that it would stop growing.
In short, the US government can’t repay its debt. It can’t even pay the interest expense without going into further debt.
Default is inevitable.
The US government is out of options and cannot repay what it has borrowed.
Therefore, the question is not whether the US government will default but how.
Consider the recurring debt ceiling farce in the US Congress, which has been raised over 100 times since 1944 to avoid an explicit default.
When faced with a choice, politicians always choose the most expedient option.
In this case, that means issuing more debt rather than making tough budget decisions or explicitly defaulting.
That raises an important question: who will buy all this debt (Treasuries)?
Historically, there has been a vast foreign appetite for Treasuries, but not anymore.
Here’s the bottom line.
The US government can’t pay off its debt.
They won’t explicitly default.
They can’t entice a meaningful amount of new Treasury buyers by allowing interest rates to rise.
That means currency debasement is their only practical option.
Fed Chair Powell’s recent pivot to monetary easing and rate cuts is compounding the situation.
That means the Fed has given up on bringing inflation down… even though it remains well above their target.
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