I was watching a podcast with Peter Schiff and he mentioned the US Debt Clock. He mentioned the ability to look at the projections made by those “in charge”. There is a bar on the top right that allows you to look back at historical information and also look into the projections for the future. Here I found some interesting observations. First of all, we just went over the $33 TRILLION in debt just two weeks ago. Today, it is $33,444,735,000,000. That is over $444 BILLION in extra debt in the last two weeks. When I say exponential growth in debt this is a clear representation of that.

He mentioned that we could fast-forward to 2027 and see what our “leaders” are anticipating. Before I lay out these numbers, I will say that I believe they will likely be FAR worse but what you will see will be concerning enough.

  • The US Treasury EXPECTS our national debt (excluding unfunded liabilities and off balance sheet expenses) to be nearly $45 TRILLION dollars. This is $12 Trillion more in the next 3+ years. Keep in mind this number does NOT include wars, etc. By the way, that is over $129,000.00 in debt for every US citizen.
  • The US Treasury EXPECTS the budget deficit to be $3.872 TRILLION in 2027. Keep in mind it took 209 years to run up our first trillion in national debt and now in one year they project we will incur nearly 4 times that amount.
  • The US Treasury EXPECTS that annual government spending will be over $11.2 TRILLION.
  • Medicaid EXPECTS that there will be a 16% increase in those on Medicaid. This means that they expect an additional 14 MILLION people will be left with NO ASSETS to qualify for Medicaid. They are anticipating that nearly 30% of our population will have NO ASSETS. WOW!
  • According to US Census state and local debt will balloon to nearly $1.5 TRILLION in State debt and over $2.8 TRILLION in local debt.
  • The US Treasury is EXPECTING that interest on the outstanding debt will be nearly $3 TRILLION. They are EXPECTING around $3.9 TRILLION in taxes.
  • The US Treasury EXPECTS that Unfunded Liabilities will be over 257.5 TRILLION in 2027. That is over $763,404.00 for every man woman and child in the USA. Just for unfunded liabilities!
  • The Federal Reserve expects total US debt to be over $147 TRILLION and net interest on the debt to be nearly $3 TRILLION. A quick bit of math shows me they are expecting to be paying 2% interest with these numbers. This could be exponentially higher.

As I said, I believe that these projections are likely pretty far off from reality because these numbers are assuming that “growth” continues- which, since they count debt as growth, it may but it will just make the debt numbers worse.

How long can it go on as we are adding TRILLIONS to our debt pile while we are paying higher interest on that debt and the tax receipts are falling?

Mark to market accounting is giving an accurate valuation of an asset that would be sold today.

How long can the banks pretend to be solvent when, if they were required to give a “mark to market” accounting many would likely be in big trouble? It is not only that many banks are going to be stuck with defaulted loans but there are fewer business deals, fewer auto loans, fewer mortgages and rising interest rates which are eroding the value of their bond portfolios. They can report the “value” of their bond portfolio as if they were holding those bonds to maturity. This makes the bottom line look better. It is an illusion that works until the “money” that they owe back to the depositors start to flee, those bonds have to be sold to raise cash, and phantom losses become REAL LOSSES. This is a major reason for the defaults we have seen this year. There are MANY other banks which have similar large problems according to Weiss Research.

With just the 4 major banks that failed this year the losses were 4 TIMES higher than the total assets of the FDIC. Where did THAT cash come from? Is it part of our national debt now or is that one of those off-balance sheet things we can’t see? The FDIC has assets of 116.1 Billion in September of 2023 that “INSURES” over $17 TRILLION according to FRED (St. Louis Fed). The FDIC lists losses in 2023 to be $548 Billion plus.

In my opinion this whole debt-based façade is crumbling before our eyes. Those that can see it and act will likely fare far better than those that think this can just keep going on.

Personally, I believe in hard assets like gold, silver, uranium, oil, food and companies that produce necessities. The companies HAVE to have strong balance sheets and income. I also believe that a portion of a portfolio should include some “stabilizers”. Many of those assets just don’t make much sense in this environment. About the only bonds that make sense to me now are T Bills. They are short-term and provide a good place to park cash. I also believe that the government will not default because they couldn’t issue any more debt if they did. They can’t take it like with a bank bail-in because they already have it, and they can be bought or sold at any time. The yields right now are better than longer-term bonds and in my opinion are FAR less risky because if rates rise the longer you wait for maturity the more losses in value you will see.

Longer-term I also believe that bonds from other countries may make a lot of sense also as I expect the dollar to fall and lose value versus other currencies. This may be a gradual process or it could happen in an instant. That is why I hold some international exposure also.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.