With all eyes focused on skyrocketing stock market indices, few are talking about the risk associated with our soaring U.S. national debt.
At the time of writing, the U.S. national debt stands ever so close to $20.0 trillion. This is the highest nominal value of debt any country in the world holds.
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And do know who’s on the hook for this $20.0 trillion in national debt? Well, of course it’s the American taxpayers.
U.S. National Debt to Hit $35.0 Trillion?
What’s worse is that the $20.0-trillion U.S. national debt figure is only expected to move higher. As I have predicting, the U.S. national debt is on the path to $35.0 trillion.
The chart below shows how much the U.S. public debt has increased in just the past few years.
The U.S. national debt increases when the government spends more than it earns. So, it has to borrow money to fund its expenses. It’s just that simple.
Reckless Government Spending
Sadly, the government continues to spend recklessly. In fiscal year 2017, between October 1, 2016 and January 31, 2017, the U.S. government incurred a budget deficit of $156.0 billion. Don’t get too caught up in the word “budget deficit.” It’s just a term that’s used to explain overspending.
For the government’s fiscal year ended September 30, 2016, the U.S. spent $587.0 billion more than it took in. For the next decade at least, there isn’t an annual balanced budget in sight. So, if we assume an average $500.0 billion in overspending a year, in 10 years, U.S. national debt will easily be at $25.0 trillion. And this estimate is if everything goes smoothly…if we don’t have a war, a natural catastrophe, or another economic crash that needs government bail-out money.
But interest rates are going up. So, with this immense debt, the cost to borrow money will go up. In fiscal year 2017, the U.S. government is expected to pay $431.0 billion in interest alone.
National Debt Fallout
Dear reader, the U.S. national debt could be a problem for generations to come, I truly believe this. And the buying power of Americans (and their wealth) could be on the line because of it.
Would you lend money to a person who’s not really good at managing their expenses, and the only way they are staying afloat is by borrowing more? Anyone with even a little financial knowledge wouldn’t.
I question whether we will soon get to a point where investors who lend money to the U.S. get the jitters and demand higher interest for their money. If this happens, inflation in the U.S. will become a real problem (not the minor one it is today). This will take a huge toll on the value of the greenback and our wealth.
You need to take into account the quickly rising U.S. national debt, the negative impact it can have on the U.S. dollar and our wealth, and the inflation it can spur when you look at the 10-year plan for your investment portfolio. Figure out how these events will impact your portfolio 10 years out and start planning for it today.
