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Treasury Deficit:
The recent announcement by the Treasury Department, disclosing a fiscal year 2023 deficit of 1.7 trillion dollars, was a stark reminder of the situation’s gravity. The latest Treasury data projections now indicate borrowing of 1.6 trillion in just the first half of fiscal year 2024. This alarming acceleration in borrowing, nearly equivalent to the entire previous year’s amount in just six months, signifies a near doubling of the deficit. Consequently, the Treasury is on course to borrow over $3 trillion this fiscal year, a 50 percent increase over previous Congressional Budget Office estimates.
It is noteworthy that, aside from the extraordinary financial challenges of the pandemic in 2020, the United States has never experienced deficits of the magnitude seen in the last, current, or forthcoming quarters—amounting to $1 trillion, $76 billion, and $816 billion, respectively. In contrast, the four quarters preceding the pandemic witnessed an average deficit of less than $300 billion, about half to one-third of the present levels
The Fiscal Time Bomb:
Importantly, the issue of excessive borrowing predates 2020. The fact that borrowing has surged nearly threefold underscores the rapid escalation of the situation. The federal government’s financial state is reminiscent of a bomb from a cinematic scenario, spherical in shape, with an impractically long fuse.
Since the 1990s, the federal government has seemingly abandoned the notion of a balanced budget, let alone debt reduction. Artificially low interest rates, attributable to the Federal Reserve’s monetary interventions, enabled both political parties to accumulate a federal debt exceeding the size of the economy. Yet, this provoked relatively modest annual interest payments to service the debt. This irresponsibility has essentially constructed a fiscal time bomb.
The Bidenomics approach, characterized by excessive government spending, borrowing, and money printing, has not only enlarged the fiscal burden but has also induced inflation, leading to higher interest rates. Given that the federal debt has reached $33.7 trillion, a mere 1 percent increase in interest rates contributes an additional $337 billion to annual debt servicing costs. As more debt is rolled over at higher rates, this compounds the Biden administration’s already substantial deficits, accelerating the debt’s growth. Presently, the Treasury expends an annualized $1 trillion to service the debt.
Can You Trust The Treasury?
Governments worldwide are offloading Treasuries, with even the Federal Reserve reducing its Treasury holdings. Paradoxically, as investors globally find Treasuries less attractive, the federal government continues to issue more to address its ballooning deficit. It is unsurprising that Treasury yields have risen to 5 percent and appear poised to ascend further.
Consequently, investor confidence in Treasuries dwindles, driving up yields and thereby increasing the cost of servicing the debt, this amplifies the deficit, leading to even more debt, creating a compounding challenge. Reagan Gold Group is here to assist Americans when the Treasury Department is not. Precious metals such as Gold and Silver provide a hedge against inflation. Precious Metals can be a source of diversification during market ups and downs such as this fiscal time bomb our government has led us into. Book a FREE consultation to get started. Contact Reagan Gold Group today to find out how to take ownership of your own wealth
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