The U.S. national debt is quickly rising. Don’t for a second believe that our country can sustain these debt levels without severe repercussions.
At the time of this writing, the U.S. national debt stands at $18.15 trillion. (Source: Treasury Direct, last accessed October 16, 2015). Please look at the long-term chart of the U.S. national debt below, paying close attention to the slope of the chart after 2008.
U.S. gross domestic product (GDP) in 2014 was $17.0 trillion. In other words, we already have more national debt than our economy generates each year.
Long-Term National Debt Projections Outright Scary
Until 2025 (this is how far the projections are available as of now), the U.S. government expects to incur a budget deficit each and every year. Remember this: when the government incurs budget deficits, it must borrow, thus raising the national debt.
Between 2016 and 2025, the Congressional Budget Office (CBO) expects the U.S. government’s budget deficit to total $7.0 trillion. (Source: Congressional Budget Office, August 25, 2015.) Please note that these are very basic forecasts that do not consider special or extraordinary situations like natural catastrophes, wars, defaults on student debts, or helping out state-level governments.
Doing some simple math based on the conservation estimates of the CBO, the national debt will be at least $25.0 trillion in the next 10 years.
Why National Debt Figures Could Get Worse?
While year after year we hear politicians talk about reducing the deficit, it never happens. In the government’s fiscal year of 2015 (ended September 30, 2015), the U.S. government’s interest expense alone was $400 billion! (Source: U.S. Department of the Treasury, last accessed October 16, 2015.)
So with a U.S. national debt of $18.0 trillion, the U.S. government paid $400 billion in interest expenses. That’s a simple interest rate of just 2.2%.
We know interest rates cannot remain at the current level forever. As inflation rises over the next 10 years, we can assume interest rates will go back to their pre-financial-crisis level of roughly four percent on 30-year U.S. bonds. In 10 years’ time, the U.S. government we will be paying $1.0 trillion annually just in interest costs! From there, it becomes a death spiral. The $25.0-trillion current U.S. national debt projection figure could easily expand to $35.0 trillion, which is 200% of our current gross domestic product.
Why Gold Matters More as the U.S. National Debt Skyrockets
Dear reader, based on the government’s own predictions, our national debt in 10 years’ time will be 55% higher than it is today. My prediction is that the U.S. national debt could be close to 100% higher in 10 years than what it is today. How could the U.S. dollar remain strong under such a scenario? It won’t. How can gold prices remain low under such a scenario? They won’t.
The ballooning U.S. national debt is one more reason why the shares of quality gold mining companies are so attractive today.