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.

Suppose you had a job that paid you $1 per second, or $3,600 per hour. That amounts to $86,400 per day and about $32 million per year. With that job, it would take you 31.5 years to earn a billion dollars. With that job, it would take you over 31,688 YEARS to earn a trillion dollars.

Suppose you earned $75,000 a year, which is the typical household income in the US. It would take you over 13 million years to make a trillion dollars. If you had a trillion one-dollar bills, you could cover the surface area of Delaware twice over. If you stacked a trillion one-dollar bills on top of each other, it would reach 67,866 miles high, about one-fourth of the distance from Earth to the moon. If you took that same trillion one-dollar bills and instead stacked them end-to-end, the length would exceed the distance between the Earth and the sun.

So that’s how enormous a trillion is.

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.

It Will Not Be an Explicit Default

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. In the wake of Russia’s invasion of Ukraine in 2022, the US government has launched its most aggressive sanctions campaign ever.

The US government and its allies froze around $300 billion of the Russian central bank’s reserves—the nation’s accumulated savings.

It was a stunning illustration of the political risk associated with the US dollar and Treasuries. It showed that the US government could deny access to another sovereign country’s reserves at the flip of a switch.

Then, in April 2024, President Joe Biden signed the REPO Act into law. It allows the US government to seize frozen Russian state assets and transfer the funds to Ukraine.

In short, the US dollar and Treasuries have become weaponized in a way they had not before. They are now clearly not neutral assets worthy of forming the bedrock of the international financial system but political tools for Washington to coerce others.

The rising political risk attached to Treasuries has made them even less attractive as a store of value. Many countries are undoubtedly wondering if the US government will seize their savings if they run afoul with Washington in even the most trivial ways.

China is one of the largest holders of US Treasuries, and it indeed took note of what is happening. Since 2022—when the US froze Russian state assets—China has sold about 25% of its Treasuries, an enormous change in such a short period.

Even US allies, like Japan, have cut their Treasury holdings. There are numerous other examples. The bottom line is that it’s clear the world isn’t hungry for US debt right now as supply is exploding.

In the bond market, when demand for a bond falls, the interest rate rises to entice buyers and holders. However, the US government cannot allow interest rates to rise because the skyrocketing interest expense has become an urgent threat to its solvency.

The interest expense on the federal debt is already bigger than defense spending and is set to become the largest item in the US government’s budget in months.

If higher interest rates are off the table and cannot entice more natural buyers, who will buy all this debt? The only entity capable of doing this is the Federal Reserve, which buys Treasuries with dollars it creates out of thin air.

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. It’s an incredible failure and will have ENORMOUS investment implications for the US dollar and gold.

If the gold price is already hitting record highs, imagine what will happen when the Fed flips back to easing with even more currency debasement than the previous rounds of stimulus.

I think the gold price could skyrocket. The last time the US experienced runaway inflation was in the 1970s. Then, gold skyrocketed from $35 per ounce to $850 in 1980—a gain of over 2,300% or more than 24x.

I expect the percentage rise in the price of gold to be at least as significant as it was during the 1970s. While this megatrend is already well underway, I believe the most significant gains are still ahead.

It’s a curious situation when Jerome Powell, a man who oversaw the largest money-printing campaign in American history, is saying that the debt is unsustainable. While maintaining that the Fed “tries hard not to comment on fiscal policy,” Powell’s suggestion for handling the debt shifts blame and burden from money printing to fiscal irresponsibility on the part of policymakers.

While they have their part to play, and it’s a big one, it’s interesting to see that Federal Reserve monetary policy hasn’t been mentioned in any of Powell’s ‘urgent’ warnings about ballooning debt:

“In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial. And I think we know that we have to get back on a sustainable fiscal path.”

It’s a wonder how, even if the government suddenly adopted responsible spending and budgeting, we would be back on a path of true sustainability after Powell oversaw the printing of over 3 trillion dollars in 2020 alone. The Fed is an interesting source of criticism for unsustainable debt, to say the least:

More loans and more deposits will increase M1 in an already-frothy inflationary environment, adding pressure to a pot that’s already in danger of boiling over from money printing during Covid. Post-COVID rate hikes have not even come close to reversing this course, with interest still far lower than it would be in an actual free market, where a few dozen bureaucrats would no longer be pulling the levers. Excessive borrowing makes US Treasurys less attractive as doubts begin to mount that the US will be able to pay its obligations back, decreasing demand for our debt and fueling further challenges for funding the government.

All of this led Fitch and Moody’s to downgrade the US’s credit rating last year, from “AAA” to “AA+” in the case of Fitch, and for Moody’s, from “stable” to “negative.” Fed interest rate hikes without an accompanying plan to reduce spending or increase revenue leave no hope at all for meaningfully reducing fiscal deficits.

From this new sense of urgency, lawmakers in Idaho and Wyoming have called for a convention of states to address the problem, with Idaho’s resolutions calling for a possible constitutional amendment limiting the spending abilities and overall power of the federal government. Idaho’s Senate Concurrent Resolution 112, or SCR 112, calls for, in its words:

“(1) imposing fiscal restraints on the federal government; (2) limiting the power and jurisdiction of the federal government; and (3) limiting the terms in office for its officials and for members of Congress. Currently, identical applications have been sent to Congress by other state legislatures.”

The question remains if anything, at this point, would be enough to get the US back on a genuinely sustainable economic track other than an outright collapse of the US dollar leading to a total monetary reset. As long as the Fed exists, the likelihood of truly reigning in out-of-control debt is nothing but a pipe dream.

With recent new all-time highs for gold and bitcoin in response to the debasement of the debt and central banks locked in a buying spree that is likely to last years, the message is clear that the banking system agrees with Peter Schiff that inflation is far from over.

The overreliance on credit cards and the accompanying increase in consumer debt are consequences of our fiat money system. Since Richard Nixon severed the last link between the dollar and gold in August of 1971, the dollar’s value has declined by 87 percent based on the government’s understated Consumer Price Index numbers. This means that even though Americans’ nominal wages have increased, their real wages have declined as their dollars buy less.

The continuing erosion of the dollar’s value makes it impossible for many Americans to accumulate meaningful savings. Those Americans who can save may actually lose money by doing so thanks to the Federal Reserve’s inflation tax that erodes the value of savings. This is why Congress has felt it necessary to provide tax incentives to encourage saving for things like retirement, education, and health care.

Congress could help protect Americans from the inflation tax by forbidding the Federal Reserve from purchasing government debt instruments such as Treasury securities. However, since this would end Congress’s ability to run up huge deficits, thus forcing it to pare back the welfare-warfare state, it is unlikely such legislation would pass.

The reliance of so many Americans on credit cards for basic necessities is one reason why many Americans are dissatisfied with the economy. The large amount of consumer debt is also a reason the Federal Reserve will not increase interest rates to anywhere near what they would be in a free market. The problem is compounded by the fact that investors and businesses have become addicted to near zero or at zero interest rates. The Fed’s relatively modest rate increases over the last couple years caused many “experts” to warn that the Fed was going to throw the economy into a recession. The Fed, though, has been able to claim recession has been avoided because the Fed kept the rates relatively low, and because government statistics are manipulated to understate the real rates of unemployment and inflation.

The Fed cannot indefinitely keep interest rates low without causing a dollar crisis. This will either be caused by, or result in, a rejection of the dollar’s world reserve currency status. At that point, interest rates will skyrocket and consumers and businesses that have been relying on debt to cope with the Fed’s dollar destruction will find the piper at their doors, demanding to be paid.

The economic crisis will be worsened by the moral crisis caused by the belief among too many Americans at all levels of society that they have a right to government-provided economic security at the expense of their fellow citizens. This will result in violence and the growth of authoritarian political movements.

The collapse of the fiat money system and the accompanying welfare-warfare state also provide an opportunity for those of us who understand the truth to build a society based around the principles of liberty. We must continue our efforts to reach a critical mass of people with the message of liberty while making plans to ensure our families can take care of themselves when the next crash occurs.

Of course I am being quite facetious.  The truth is that what we are doing to future generations of Americans is beyond criminal.  We are literally committing national suicide, but each election cycle most of the same big spending politicians just keep winning over and over again.

Those on the other side would argue that it has been absolutely necessary to borrow and spend so much money. If we had not propped up the U.S. economy with giant mountains of borrowed money, it would have collapsed long ago.

In addition, spending so much money allows us to project military and economic power all over the planet.  If we only spent what we brought in, America’s standing in the world would be greatly reduced.

Having the primary reserve currency of the world is an enormous source of power, but now that power is fading.

Nations all over the globe are starting to move away from using the U.S. dollar in international trade, and they are becoming a lot more hesitant to buy our debt.

You can only borrow and spend so much before the entire Ponzi scheme collapses, and at this moment we are more than 34 trillion dollars in debt…

US national debt has reached a record high – hitting $34 trillion for the first time in history.

Data published by the Treasury Department Tuesday showed that outstanding federal borrowing soared to $34.001 trillion on December 29, just weeks ahead of Congress deadlines for new federal funding plans.

The staggering figure, which is a major point of contention between Republicans and Democrats, is equal to $101,233 in federal debt for every person in America, according to the Peter G. Peterson Foundation.

So if there are four people living in your household, your share of the national debt is more than $400,000.

And every day the debt gets even larger.  As Wolf Richter has pointed out, the size of the national debt has increased by 2.5 trillion dollars in just the last seven months…

The total US national debt spiked by $1.0 trillion in 15 weeks since September 15, to $34.0 trillion, according to the Treasury Department’s figures this afternoon. In the seven months since the debt ceiling was lifted, the national debt spiked by $2.5 trillion.

These are huge gigantic numbers that are piling up as a result of the incredible hard-to-fathom daredevil reckless shake-your-head deficit spending by Congress.

Overall, the U.S. national debt has grown by $6.25 trillion since Joe Biden entered the White House.

It took the first 225 years of U.S. history for the U.S. national debt to reach the 6 trillion dollar mark, and now we have added more than 6 trillion dollars to the debt in less than 3 years.

This is what the endgame looks like.

We are in a debt spiral that is totally out of control, and there is no way that this story is going to end well.

And despite the fact that we are endlessly pumping colossal piles of cash into the economy, our economic conditions continue to deteriorate.

On Wednesday, we learned that U.S. job openings have fallen “to the lowest level in more than two years”…

U.S. job openings dropped in November to the lowest level in more than two years, the latest evidence that the Federal Reserve’s interest-rate hike campaign is continuing to cool the labor market.

That is a sign that the economy is getting worse.

And more large companies continue to lay off workers.  For example, Xerox just announced that it will be laying off 15 percent of its workforce…

Xerox on Wednesday announced it will cut 15% of its workforce as part of a plan to implement a new organizational structure and operating model.

Xerox, which offers digital printing and document management technologies, had about 20,500 employees as of Dec. 31, 2022, according to a filing with the U.S. Securities and Exchange Commission. Based on this figure, Wednesday’s layoffs will affect about 3,075 employees.

Shares of Xerox closed down more than 12% following the announcement Wednesday.

So what can we do to “get the economy going again”?

Well, we can follow the example of the federal government and borrow and spend even more money.

Of course much of the nation is already drowning in debt.  According to one recent survey, only about half the country will be able to pay off their December credit card balances in full…

Only half of America’s credit card customers believe they can pay off their December balance in full, according to an industry index, signaling a low ebb in “credit card confidence” as the nation emerges from the holidays.

The LendingTree Credit Card Confidence Index, a monthly survey published since 2018 by the personal finance site, dipped to 51% in December, an all-time low.

In a nationally representative survey of 1,514 cardholders, only 51% voiced confidence that they could pay off their card balance this month. In November, the Confidence Index stood at 58%.

Our forefathers handed us the keys to the greatest economic machine in world history.

But that was never enough for us.

We always had to have more, and so we just kept borrowing and spending.

Now the endgame has arrived, and it is going to be excruciatingly painful.

U.S. consumers are drowning in record levels of debt, U.S. corporations are drowning in record levels of debt, state and local governments are drowning in record levels of debt, and the federal government is drowning in record levels of debt.

America’s empire of money was nice while it lasted, but now the jig is up and the collapse that is looming is truly going to be one for the history books.

Michael’s new book entitled “Chaos” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

At this moment, our national debt is sitting at $33,836,693,993,860.35. It is probably going to hit 34 trillion dollars by the end of the year.

To put this into perspective, when Barack Obama first entered the White House we were about 10 trillion dollars in debt.

We are literally committing national suicide, but for a long time most Americans didn’t really care because we were not experiencing any serious consequences. But now the party is ending.

Thanks to rapidly rising interest rates, U.S. Treasury bonds “are in a bear market worse than the dot-com bust and almost as bad as 2008”…

Elementary economic forces — too much supply and not enough demand — have collided to create the worst stretch for U.S. government bonds since the Civil War. The government keeps borrowing to cover its budget deficits, while once-reliable buyers of that debt, both at home and abroad, have pulled back.

The result: Investors are demanding the steepest yields since 2007. Auctions of fresh bonds that were once routine are now going terribly. And bond portfolios are getting absolutely hammered. The longest-dated Treasury bonds are in a bear market worse than the dot-com bust and almost as bad as 2008.

A bond crash normally precedes a stock market crash.

That is exactly what happened in 2008, and it appears that the same pattern is being reproduced now.

So if you have a lot of money in the stock market, you may want to brace yourself for what is ahead.

In the past, we could always rely on China, Japan and other foreign buyers to keep the party going, but now they are not very interested in our bonds…

China and Japan, once reliable buyers of Treasury bonds, have been selling them to prop up their weakening currencies. A decade ago they held more than 22% of U.S. government bonds; today it’s 7%.

The Ukraine war has dampened demand among Eastern European buyers, said Steve Ricchiuto, the chief U.S. economist at Mizuho. Increasing U.S. oil production means fewer petrodollars in the Middle East to be reinvested through the Treasury market.

U.S. banks, too, are stepping back.

I certainly can’t blame our banks for “stepping back” from buying more bonds.

Thanks to the dramatic shift in interest rates that we have witnessed, they are sitting on hundreds of billions of dollars in unrealized losses.

So who is going to buy our debt in 2024 and beyond? That is a very good question. And servicing the debt that we have already accumulated is becoming a major problem.

During the last year, the federal government “had to spend one-fifth of all the money it collected just on debt interest”…

The U.S. federal government has borrowed so much money that, over the past year, it has had to spend one-fifth of all the money it collected just on debt interest—which came to almost $880 billion.

Americans paid some $450 billion less in income taxes for the year, trapping the government in the pincers of a fiscal crunch.

The country teeters on the brink of a debt spiral that could devolve into a fiscal crisis or hyperinflation, several economists told The Epoch Times.

“The problem is serious because, any way you cut it, taxpayers are paying interest on the mountain of debt that has been accumulated,” said Steve Hanke, a professor of applied economics at Johns Hopkins University. “In short, they are paying something for nothing.”

In 2024, the U.S. government will spend well over a trillion dollars just in interest on the national debt.

That wasn’t supposed to happen until 2030.

A day of reckoning has arrived, and it is just a matter of time before the entire system comes crashing down like a house of cards.

This isn’t going to be just another “financial crisis”.  As James Rickards has aptly noted, what we will soon experience will be “qualitatively different” from anything that we have ever experienced before…

The next financial crisis will not be merely a bigger version of the 1998 and 2008 crises, it will be qualitatively different. It will encompass multiple asset classes on a global scale. It will exhibit inflation not seen since the 1970s, insolvency not seen since the 1930s and exchange shutdowns not seen since 1914. State power will be summoned to contain panic.

What Rickards is describing is a full-blown economic collapse.

So what will our society look like once such a scenario unfolds?

Already, economic conditions have deteriorated so dramatically that demand at local food banks has risen to “unprecedented” levels in some cities…

The demand for local food banks is on the rise as soaring prices impact average Americans under President Joe Biden.

The increasing demand for food banks demonstrates how soaring inflation driven by “Bidenomics” negatively impacts lower income families.

“We are seeing unprecedented demand,” Jackie DeCarlo, chief executive of Manna Food Center, told the Washington Post on Monday.

If things are this bad now, what will we be facing a year or two from now? At this point, there is no escape.

All our politicians can do is to keep the party going for as long as they possibly can. They knew that they were destroying our financial future, and they also knew that they couldn’t keep borrowing and spending insane amounts of money forever. Of course nobody can say that we weren’t warned.

People like me have been relentlessly warning about our financial condition for years, and now I am warning about what is coming in the aftermath of the approaching financial meltdown.

Our leaders tried to outrun the basic laws of economics for a long time, and for a while they were flying high. But now reality has caught up with them, and we are all going to pay a very bitter price for their crimes.

Sound off about this article and video on our Economic Collapse Substack.

Michael’s new book entitled “Chaos” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Our whole society is absolutely drowning in debt at this stage, and the only way out is for the entire system to collapse.

On Tuesday, we learned that the total amount of credit card debt in the U.S. has now reached a new record high of 1.08 trillion dollars…

Americans now owe $1.08 trillion on their credit cards, according to a new report on household debt from the Federal Reserve Bank of New York.

Credit card balances spiked by $154 billion year over year, notching the largest increase since 1999, the New York Fed found.

“Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth,” said Donghoon Lee, the New York Fed’s economic research advisor.

Credit card debt has always been one of the most insidious forms of debt, but now the banks are pushing credit card interest rates to unprecedented heights…

The rise in credit card usage and debt is particularly concerning because interest rates are astronomically high right now. The average credit card annual percentage rate, or APR, hit a new record of 20.72% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in July 1991.

If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if you owe $5,000 in debt — which the average American does — current APR levels would mean it would take about 279 months and $8,124 in interest to pay off the debt making the minimum payments.

It should be illegal to issue a credit card that has an interest rate higher than 20 percent.

But banks are going to keep doing it because our politicians will not stop them.

So don’t fall into their trap.

Other forms of debt are rapidly growing as well…

Auto loan balances also contributed to the uptick, climbing by $13 billion over the course of the third quarter to $1.6 trillion. Student loan debt, meanwhile, increased by $30 billion while mortgage balances jumped by $126 billion to $12.14 trillion.

Overall, U.S. households are now more than 17 trillion dollars in debt.

I can’t even begin to describe how foolish we have been.

The only way to keep the party going is to borrow even more money, but thanks to higher interest rates we are not going to be able to purchase as much.

This is something that Kevin O’Leary pointed out in a recent interview…

“We’re looking at a downsized America. I tell it like it is,” O’Leary said on “The Big Money Show.” “Three years ago, even 24 months ago, you get a mortgage at 4.5%. You’re lucky to get one at eight today. So that means the size of the house you’re going to buy is 20 to 25% smaller. That’s a downsize.”

“You want to borrow for a car? Sorry, that’s 8 to 9%. Used to be five,” the O’Leary Ventures chairman added. “So, smaller, less expensive car. That’s happening at the same time.”

He is right.

But we just can’t help ourselves, and so we are going to continue to borrow more money.

The same thing is true for our corporations. Today, corporate debt is at the highest level ever recorded. And state and local governments continue to borrow money as if tomorrow will never come.

But the biggest offender of all is the federal government. The national debt is currently sitting at 33.6 trillion dollars, and it is constantly going higher. You can watch the national debt clock race upwards right here.  To me, that debt clock is actually a countdown to the financial destruction of America.

Once upon a time, I warned that the U.S. would be paying a trillion dollars in interest on the national debt by the year 2030. Well, guess what? We got there early. According to Bloomberg, we have already crossed that ominous threshold…

Estimated annualized interest payments on the US government debt pile climbed past $1 trillion at the end of last month, Bloomberg analysis shows. That projected amount has doubled in the past 19 months from the equivalent figure forecast around the time.

The estimated interest expense is calculated using US Treasury data which state the government’s monthly outstanding debt balances and the average interest it pays.

Wow.

As usual, things are even worse than many of us were originally projecting.

Before I end this article, there is one more thing that I wanted to mention.

The “glitch” that affected the direct deposit of so many paychecks all over the nation still has not been resolved five days later…

Federal Reserve officials are urging banks to work with customers hurt by ongoing deposit delays that have prevented some people from accessing their paychecks and other funds.

A number of customers still haven’t received their direct deposit paychecks following a “human error” that damaged the plumbing of America’s banking system. The deposit delays are linked to a problem that emerged on Friday with the Automated Clearing House (ACH) payments system, causing headaches for consumers and employers.

“The Federal Reserve encourages banks to work quickly to resolve issues for customers experiencing delays in receiving direct deposit payments as a result of operational issues at a private sector payments provider,” a Fed spokesman told CNN in a statement.

Was it really a “human error” that caused this?

If someone just hit a wrong button, you would think that would be relatively easy to fix. Keep a close eye on the banks.  As I discuss in my new book entitled “Chaos”, the banks are the beating heart of our economy and enormous trouble is brewing. Without healthy banks, our entire system will go haywire very rapidly.

We need to borrow money for just about every major purchase that we make, and it is the banks that make the vast majority of those loans. If the flow of credit starts to dry up, so will our standard of living. Unfortunately, a credit crunch has now begun, and that is going to have very serious implications for all of us.

Share your thoughts about this on our Economic Collapse Substack.

Michael’s new book entitled “Chaos” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.