America’s Ballooning Fiscal Gap Threatens to Blow Up Its Future

Lau Vegys, Doug Casey’s Crisis Investing

Today’s chart shows the path of U.S. government spending and revenues from 1989 to now, along with projections for the next 31 years.

See that gap between the lines? That’s where our debt comes from. Every year, when spending outpaces revenue, it’s like putting the difference on the national credit card.

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If you take a closer look, the late ’90s and early 2000s were the only time the government’s books weren’t a total mess. Revenues were up, spending was under control. We even toyed with the idea of paying off the national debt. Seems like a fairy tale now, doesn’t it?

But then the 2000s rolled in, and things took a turn. Wars, bailouts, you name it. The gap between what the government was taking in and what it was spending started to widen alarmingly. And just when we thought we’d seen it all, 2020 hit us like a freight train. COVID, lockdowns, stimulus checks galore. Government spending skyrocketed to 30% of GDP.

That was a recipe for a debt explosion, and that’s exactly what happened.

To put it in numbers, our national debt jumped from about $23 trillion at the start of 2020 to over $27 trillion by the end of the year. That’s a staggering $4.5 trillion increase in just one year! For perspective, it took the U.S. over 200 years to accumulate its first $4 trillion in debt.

At writing, we’re staring at $35.67 trillion and counting in national debt, with interest payments exceeding $1 trillion for the first time in history.

That’s grim, but the future doesn’t look any brighter. See that orange line stretching into the distance? That’s government spending, and it’s on an upward trajectory with no signs of slowing down. Meanwhile, the black line – that’s revenue – is barely budging. We’re looking at a gap that’s widening year after year, with no end in sight.

By 2054, we’re looking at spending levels above 30% of GDP with revenues hovering under 20%. This means we’ll be adding trillions to the national debt every single year, and that’s probably a best-case scenario. ~~ Lau Vegys, Doug Casey’s Crisis Investing

Lau Vegys, Doug Casey’s Crisis Investing

Today’s chart shows the path of U.S. government spending and revenues from 1989 to now, along with projections for the next 31 years.

See that gap between the lines? That’s where our debt comes from. Every year, when spending outpaces revenue, it’s like putting the difference on the national credit card.

Turn Your Images On

That was a recipe for a debt explosion, and that’s exactly what happened.

At writing, we’re staring at $35.67 trillion and counting in national debt, with interest payments exceeding $1 trillion for the first time in history.

The cause of this problem is not hard to find. The Fed caused the first mortgage finance crisis by dropping its key rate from 6% in 2001 to only 1% in 2003. This set the housing market a-tingling. Remember the ‘lo-doc’ mortgage loans? All it took to get a mortgage — guaranteed by the feds — was an application. Then, when the Fed tried to bring rates back into a normal zone, it triggered widespread bankruptcies, defaults and foreclosures.

So, the Fed cut rates again…from over 5% in 2007 to under 1% in 2009. Adjusted for inflation, rates remained under zero for most of the next fifteen years. This led to a huge new bid for housing…much of it coming from institutional buyers able to tap into the Fed’s low rates. The new demand led to the highest prices ever — now averaging about $100,000 more than the typical family can afford.

Don’t panic. Don’t average down. Don’t hold. Don’t hope.

Instead:

Review your open positions. Are any of them hitting your stop loss? Cut them.
Sit in cash if there’s no clear setup. Patience beats forcing trades.
Paper trade if you need the reps. Build your pattern recognition without risking capital.
Watch for opportunities. Red days often create the volatility needed for explosive small-cap moves.

This market will have plenty more red days. That’s guaranteed.

Our Dollar 2.0 investment thesis is well intact. Just getting started, actually. And if you’ve been watching the crypto space lately, you’re aware that the stocks highlighted in our Dollar 2.0 research reports are selling at a nice discount right now.

First, some background.

Washington has a habit of passing laws with names that promise fireworks but paragraphs that deliver footnotes.

The Genius Act was treated exactly that way.

It’s been a year for Google. In July, Google avoided an antitrust breakup. Buffett’s successor at Berkshire Hathaway, Greg Abel, added the search ecosystem to its portfolio in Q3.

Last week, Google unveiled AI chip lines that are competitive with Nvidia.

All good for your 401(k), even if the historic level of market concentration in Mag 7 stocks got more pronounced.