The national debt of the United States surpassed $35 trillion on July 26, 2024, according to U.S. Treasury data.
If this is the first you’re reading about the national debt breaking another record, that’s probably because this latest record barely made a blip in national news coverage. As shocking as it may be, the pace of our nation’s debt expansion has become so fast that another trillion dollars can feel like background noise. However, the consequences of the national debt’s expansion shouldn’t be ignored.
The national debt is turning into an avalanche.
Just 10 years ago, the U.S. national debt was around half its current size, sitting at just over $17.5 trillion in Q2 2014, according to the Department of the Treasury. Then, at the start of 2020, the national debt was just over $23 trillion. Four years later, at the start of this year, it had just surpassed $34 trillion. Now, it has grown by yet another trillion in less than a year.
Looking at this chart, it’s easy to see how quickly our national debt’s growth rate is accelerating. It’s almost like an avalanche—gaining ever more volume the faster it goes. What may be harder to see are the consequences this could have for our economy. I’ve found a few theories, though—and they don't paint a pretty picture.
The massive size of the national debt could lead to a “vicious spiral” for our economy.
Analysts at DoubleLine Capital and other financial firms say the rapid rate of debt expansion will weigh on the economy. Ryan Kimmel, a macro asset allocation analyst at DoubleLine, views debt growth and economic issues as cyclical. Kimmel explained to Reuters, “Your interest expense goes up, which requires higher taxes, which then crimps economic growth, which again feeds through into further economic contraction… It’s a vicious spiral. “
BlackRock Inc. CEO Larry Fink has a similarly dismal view, having stated that he believes that the growing national debt could lead to economic stagnation similar to what Japan faced in the late 1990s and early 2000s. Back in March 2024, before we even crossed the $35 trillion mark, Fink said the national debt was “more urgent than I can ever remember.”
Gold can act as a shield in times of economic uncertainty.
One of the many reasons I own tangible assets like physical gold is to maintain a hedge against the consequences of reckless government spending. Gold has a long history of growth in times of economic uncertainty and volatility, helping to balance out losses experienced by other asset classes and increase recovery times for portfolios.
If an avalanche of debt is getting ready to come barreling down on our economy, I want to feel prepared. Don’t you?
