It seems like news of the national debt reaching new highs has come so frequently that, for many, it’s become little more than background noise. But as our nation’s borrowing continues to expand at an alarming rate, we as informed Americans gain more opportunities to reexamine our own finances and decide how best to protect our wealth from the effects of economic uncertainty.
The U.S. national debt has reached over $34 trillion for the first time in history.
On December 29, 2023, the national debt of the United States—which includes both the amount it owes to creditors and money owed between government agencies—topped $34 trillion for the first time in history. For reference, Fox Business notes that 40 years ago, the national debt was around $907 billion.
Add in the expense of maintaining this debt at our current elevated interest rates, and the numbers may become even more concerning. In fiscal year 2022, for example, our federal government spent $475 billion on interest payments on the national debt—a number that is expected to triple by 2032 and explode to $5.4 trillion by 2053, according to Fox Business. “To put that into perspective,” they write, “that will be more than the U.S. spends on Social Security, Medicare, Medicaid, and all other mandatory and discretionary spending programs.”
Why does this matter? Because along with this historic level of debt comes both an increased risk of default and an increased risk that the government may be less able to provide financial assistance in case of an economic emergency. Keep in mind that according to CNBC, the trust funds supporting Social Security are set to run out around 2034, which may result in cuts to benefits.
Clearly, this issue deserves far more attention than being relegated to “background noise.”
A record national debt is just one factor that may impact our portfolios in 2024.
In last week’s “Gold News & Views,” I wrote about some of the top news stories of 2023, and how they might impact 2024. Among those topics were geopolitical uncertainty, continued friction in the banking sector, and the uncertainty surrounding Federal Reserve policy and its effects on the economy.
Predictions and news regarding these factors have continued in the past week. On December 29, 2023, for example, UBS chief U.S. economist Jonathan Pingle told CNBC that while the Federal Reserve will likely bring interest rates below 3% before the end of 2024—coming closer to their goal of 2%—a pullback in consumer spending will also trigger a mild recession. And on December 31, Chinese President Xi Jingping promised a reunification of Taiwan and mainland China, increasing concerns that China may invade Taiwan to make that reunification possible, which could have drastic global political and economic consequences.
Clearly, much remains uncertain for 2024—which, for myself and those like me, is a signal to look for opportunities to adjust our portfolios accordingly.
Another sector that reached record highs in 2023? Physical gold.
While the growth of our national debt led us to reexamine our portfolio’s risk exposure, one asset in particular—physical gold—provided a powerful sense of optimism.
On December 27, 2023, London’s gold price benchmark hit an all-time high of $2,069.40/oz., capping off a year during which gold saw an impressive growth of 13%, according to Barron’s. On December 31, Barron’s made a strong case for gold, noting that consumers “shouldn’t ignore gold’s 2023 rally” or the factors that have supported gold’s record highs this past year, including record buying by central banks—especially China, which may be seeking a way to shore up its reserves in the event of economic sanctions resulting from any military action taken against Taiwan.
Barron’s also notes that the rally in gold prices last year took place with relatively little demand from institutional buyers and consumers. According to the article mentioned above, “If [consumers and institutional buyers] get involved, the argument goes, gold could add to its recent gains.”
Gold has historically grown in times of uncertainty and volatility. If our national debt continues to expand along with other factors like geopolitical conflict, 2023’s record highs may only be the beginning for gold.
