PNW STAFF
As America's debt grows unchecked, the question isn't so much whether the U.S. dollar will falter but when. Seven key indicators signal trouble, painting a picture that suggests the dollar's days as the world's primary currency may be numbered.
And yet, the troubling debt spiral unfolding before our eyes receives little more than passing concern from leaders and policy shapers. The consequences of ignoring these signals could be catastrophic.
1. Federal Budget Deficits - A Debt-Fueled Spiral
One of the clearest signs of economic instability is the massive federal budget deficit. Despite optimistic projections that rely on implausibly smooth conditions--no wars, recessions, or emergencies--U.S. debt is projected to grow by $22 trillion over the next decade. With each economic shock or policy shift, these optimistic estimates become even less realistic. The American government, it seems, has become so comfortable borrowing that repaying this debt is an afterthought.
Such soaring deficits can destabilize the dollar by making it less attractive to foreign investors, especially as interest on this debt crowds out critical public spending. The most disturbing aspect of these projections is the near certainty that deficits will only accelerate over time, locking the U.S. into a vicious cycle of borrowing.
2. The Ballooning Federal Debt
Federal debt now stands at $35 trillion, exceeding 123% of the nation's GDP, a staggering burden for any economy. The government's addiction to spending has become so extreme that, contrary to logic, government expenditure is counted as a "positive" in GDP.
In reality, government spending on interest payments and debt-financed projects only deepens America's financial vulnerability. The real economy supporting the debt--the economy of workers, businesses, and production--is already strained under the weight of this spending spree. And as this cycle continues, the true strength of the economy, relative to debt, is much weaker than headline figures suggest.
3. The Exploding Federal Interest Expense
The cost of servicing America's debt is surpassing $1 trillion annually, exceeding all other expenditures, including national defense. This reality should be a wake-up call: the U.S. is heading toward a future in which its largest expenditure isn't education, health, or infrastructure--it's debt interest. Even more alarming, the government is on the brink of spending more on debt than on Social Security, a pillar of American society.
When interest payments alone begin to dwarf federal spending on social programs, the consequences can be extreme. The government may find itself in a fiscal bind, with fewer funds for essential programs and a growing need to placate creditors. This can create a perception of financial instability, further weakening the dollar's appeal.
4. The Federal Funds Rate and the Struggle with Inflation
In a desperate attempt to curb inflation in 2022, the Federal Reserve embarked on one of its steepest rate-hiking cycles in recent history, moving from near-zero rates to over 5% in just 18 months. But this monetary medicine came with consequences: as rates rose, the government's interest burden exploded, forcing the Fed back to rate cuts. The inability to sustain higher rates, even when inflation persists, suggests that the U.S. economy is no longer resilient enough to weather the fallout from responsible monetary policy.
This cycle of low rates followed by frantic hikes and cuts only makes inflation harder to control, creating a volatile environment that could further erode confidence in the dollar.
5. Money Supply and Currency Debasement
The Fed's tools of "currency debasement and gaslighting," as critics would say, are thinly veiled attempts to inflate the money supply in a bid to control debt interest costs. When money is created "out of thin air" to buy up government bonds, inflation inevitably follows, eroding purchasing power and widening inequality. The result is a world where many Americans struggle to stay afloat financially, watching as their real wealth erodes amid skyrocketing prices and stagnant wages.
Those whose wealth hasn't grown by at least 37% since 2020 may already be falling behind, losing ground in an economy that penalizes prudent saving and rewards speculative investment.
6. CPI as a Misleading Inflation Measure
The Consumer Price Index (CPI), long relied upon as a measure of inflation, has come under fire as being misleading. Designed to provide a snapshot of "average" price increases, the CPI doesn't account for the diverse realities Americans face. Cost-of-living pressures in metropolitan centers differ vastly from those in rural areas, and yet all are squeezed into the same "basket" of goods for reporting purposes. Critics argue that selective weighting and item choice skew the results, creating a narrative that inflation is "under control" when, in reality, most Americans experience far steeper price increases.
As long as the government can cherry-pick items to understate the CPI, Americans' lived reality of inflation will continue to diverge from official reports, leaving many with an illusion of stability.
7. Gold Prices and the Flight to Stability
Gold's enduring value is a testament to its role as a hedge against currency collapse. Unlike fiat currency, which governments can inflate at will, gold has a finite supply and can't be debased. It's a refuge that appeals to investors in times of economic uncertainty. With record-high gold prices in recent years and central banks globally increasing their gold reserves, it's clear that confidence in fiat currency, including the U.S. dollar, is eroding.
As the U.S. continues down a path of excessive spending and monetary easing, the stage is set for even more Americans to turn to physical gold as a store of wealth and security, signaling their doubts about the dollar.
Conclusion: The Road Ahead
None of these seven indicators on their own might signal imminent collapse. But together, they form a compelling case that the U.S. dollar's stability is anything but secure. While policymakers and officials continue to downplay concerns, the growing federal debt, rising interest expenses, and manipulated inflation measures paint a troubling picture of an economy on borrowed time.
For now, the U.S. dollar remains the world's reserve currency, but as these fiscal realities become harder to ignore, there may come a tipping point. And when that moment arrives, Americans will find that gold and other stable assets have retained their value as the dollar has not.