I’ve been quite pessimistic about the state of America for a while now. Apologies for that, but, well, numbers don’t lie.
The nation’s debt has surpassed $38 trillion. Just that figure alone makes the overall financial picture seem grim. Repaying this debt seems unlikely, if not impossible.
Looking ahead to 2024, America’s GDP is projected to be around $29.2 trillion, indicating that debt is over 130% of annual output. In a corporate world, any sensible advisor would recommend filing for Chapter 11 to seek relief.
Interestingly, Washington is racking up more debt at a rate of about a trillion every 100 days. The cycle of borrowing pushes the nation deeper into a rising debt spiral, which seems hopelessly one-directional. Game over, perhaps?
As nations move away from the dollar, excessive dollars are likely to flood the market. A real devaluation could be on the horizon.
Then there’s the matter of $210 trillion in future unfunded liabilities mainly tied to Social Security and Medicare. These figures feel almost unreal.
Underlying this is a currency that’s losing value. The dollar has lost about 87% of its value since we abandoned the gold standard back in 1971. The petrodollar system kept the world reliant on our currency by mandating oil transactions in dollars. However, with Saudi Arabia’s commitments to that arrangement ending last year, it seems global energy trade is already diversifying away from the dollar.
The shift away from the dollar will likely bring an influx of unnecessary dollars. Still, a genuine devaluation hasn’t fully hit us yet.
To fund ongoing expenditures, the government will need to keep selling bonds. But interest from foreign investors is waning. This could drive up prices. Some governments are even purchasing their own bonds to stave off downturns. For instance, the Cayman Islands now holds $1.85 trillion, marking its most significant foreign stockpile. Treasury officials seem to be downplaying these problems. Stability feels far off.
Meanwhile, the U.S. economy rests on an extremely shaky foundation: 70% of it is reliant on consumption. That’s seven out of ten dollars based on spending by individuals who are increasingly strapped for cash. Household debt has skyrocketed to a staggering $18.6 trillion, making up nearly two-thirds of GDP. Families are now focused on reducing debt rather than encouraging growth.
As consumption declines, so does the economy. This contraction leads to reduced tax revenue, and with a weakening dollar, the scenario appears increasingly grim.
Add artificial intelligence into the mix, and it complicates things even further. AI is set to threaten millions of jobs and could accelerate existing economic disruption. With revenues dwindling and debt soaring, it’s hard to see how governments can maintain stability.
Some still cling to ideas like universal basic income. But where would the funding come from? The same government is already facing a shortfall of $210 trillion in commitments. I mean, seriously?
All these factors are pointing to a potentially bigger economic crisis than the one in 2008. Washington managed to freeze that crisis with a $29 trillion bailout—money that also didn’t exist at that moment. We basically conjured it and added it to the national debt.
At this point, that option seems unavailable.
Now, governments are facing significant debt triggered by a weak dollar and dwindling foreign buyers. This upcoming crisis won’t hit any one sector; it will affect everything:
- Record mortgage debt: $13.1 trillion
- Record credit card debt: $1.2 trillion
- Commercial real estate facing collapse: $4.9 trillion
- Big Tech racking up hundreds of billions to fuel the AI bubble
Interestingly, Sam Altman from OpenAI is already anticipating a future bailout for when the AI sector faces its inevitable downturn.
Total U.S. public and private debt is set to surpass $102.2 trillion in 2024. Washington can’t realistically bail out a single major sector, let alone all of them. Back in 2008, the national debt was $10 trillion; now, it’s quadrupled. Demand for dollars is likely to soften, and foreign lender patience is running low.
So, who would step in during the next financial mess? Who will buy government bonds? Who will shoulder the losses?
No one. Not abroad. Not at home. Nowhere else on Earth.
This leaves Washington with one option—printing trillions of new dollars and handing them over to itself. More IOIs (instead of IOUs) stacked on a crumbling foundation.
This wave of printing will likely obliterate any remaining value of the dollar.
Honestly, do you think the dollar has faced a significant drop? I honestly haven’t seen it. Anything yet.
