Federal Debt Level Has Effect on Dollar
The U.S. national debt currently stands at about $20.0 trillion. Assuming that the U.S. population is around 320 million, each American man, woman, and child owes roughly $62,500. (Source: “The Daily History of the Debt Results,” TreasuryDirect, last accessed September 14, 2017.)
The U.S. national debt figure is expected to grow immensely, even by the most conservative estimates. The Congressional Budget Office (CBO) expects that the U.S. government’s budget deficit will come in at $9.4 trillion between 2018 and 2027. (Source: “An Update to the Budget and Economic Outlook: 2017 to 2027,” Congressional Budget Office, June 29, 2017.)
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Every dollar of deficit that the government incurs adds to the overall U.S. national debt figure. So, by the government’s own estimate, in about 10 years’ time, we could be looking at a U.S. government debt of around $30.0 trillion.
Now imagine if we didn’t have a debt ceiling, which is the maximum amount of money that the federal government can borrow. That limit can only be increased by Congress.
In a rare bipartisan move, President Donald Trump met with Senate Minority Leader Chuck Schumer and talked about the idea of repealing the U.S. debt ceiling. (Source: “Trump, Schumer agree to pursue plan to repeal the debt ceiling,” The Washington Post, September 7, 2017.)
If the debt ceiling is removed, the U.S. government gets a “free pass” on spending, since the debt ceiling that’s currently in place stops the government from spending recklessly.
I’m on record saying that the U.S. national debt will soar to beyond $34.0 trillion within 10 years. If the debt ceiling is removed, all bets are off.
Dear reader, the more a country borrows, the more likely its creditor will refuse to lend it more money.
Would you lend money to a family that has a significantly higher debt than their income, and the only way they can service their current debt is by getting into even more debt? Even a person with no financial knowledge would say that this is a bad deal. Unfortunately, the U.S. government is like that family.
In the long term, all this debt is negative for the U.S. dollar (it has been in a mini-crash all year), but positive for the precious metals, gold and silver. The U.S. dollar index (the value of the U.S. dollar compared to other major world currencies) is down 10.8% so far in 2017. Meanwhile, gold bullion is up 15.7% this year. Expect these trends to continue.
