US Government to Borrow Record $3 Trillion This Quarter
The US government is planning to borrow $3 trillion this quarter – the largest amount it has ever borrowed in a single quarter, and in fact the largest amount it has borrowed in an entire year. At a stroke, the Treasury has essentially quadrupled the size of the projected annual budget deficit for Fiscal Year 2020, and with another three months left after this quarter, there’s no telling how much larger the deficit will grow. That portends some severe fiscal trouble in the coming years.
The national debt is already approaching $25 trillion, a sum that we weren’t supposed to reach for another couple of years. Yet in a matter of weeks we’ve reached this momentous milestone, and now we’re set to blow right through it. At this rate, the $30 trillion mark might fall next year, and from there on out it will be off to the races.
This huge amount of debt issuance has to be paid for somehow, and ultimately it will be taxpayers who will have to foot the bill. All government debt is eventually paid for through taxation. Whether that’s direct taxation or the stealthy taxation of inflation is the question, but taxation is the name of the game.
Most Americans are already plenty irritated at the amount of taxes they pay. And while many Democrats have made no secret that they want to raise taxes in the future to pay for plans like Medicare for all, free college tuition, etc., the ability to raise taxes on a population that’s facing 30% or higher unemployment is pretty limited. That’s why inflation is the more likely method the government will pursue to pay off its debts.
Of course, no one ever expects the full amount of the national debt to be paid off. The government just needs to bring in enough money to keep rolling over its current debt and paying off interest, even if it has to borrow more to pay that interest. And the more it has to borrow and the larger the debt grows, the higher inflation will have to be to keep creditors placated.
But with higher inflation comes higher prices, devaluation of the dollar, and reduced purchasing power for US residents. If you feel like your dollar already doesn’t go as far as it used to, just wait a few years and see how little your dollar will buy then.
Inflation robs savers and investors and rewards debtors and profligate spenders, with the federal government being the largest debtor and spender of them all. What inflation accomplishes is nothing more than a massive wealth transfer from the productive sector of US society – savers, investors, businesses – to the most wasteful sector of society.
The fact that the government is now borrowing record amounts of money means the wealth transfer is occurring even faster than normal, and its effects will be even greater. Investors need to protect themselves and their investments against that massive borrowing, and against the devalued dollar that will result.
Thankfully, you have the ability to protect your assets against inflation with gold and silver, precious metals that hold their value against inflation no matter what happens. 100 years ago, a $5 bill or a $5 gold coin would have bought you a good pair of men’s shoes. That same $5 bill will barely buy you a cup of coffee today. But a $5 gold coin today will sell for a hundred times what it did back then, or maybe even more, allowing you to buy a pair of shoes and have money left over.
That’s the power that gold has, which is why investors have favored it for centuries to safeguard their wealth against financial turmoil, inflation, and wealth appropriation. Isn’t it about time you thought about adding gold to your investment portfolio?