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US Debt is Greater and Riskier Than Most Americans Realize

US Debt Bomb

The US government debt bomb is still ticking, its potential for devastation growing stronger, as any hopes toward debt reduction appear to be slipping further and further away. 

We’re talking about the US Federal debt. On January 15th, US public debt grew by $50 Billion, adding to an already overburdened Federal debt outstanding–a figure of almost $22 Trillion.

But here’s another sobering fact: as large as it may seem, $22 Trillion doesn’t even account for the entirety of the US government’s debt load. Yes, there’s plenty more on the balance sheet.

What other debts remain outstanding?

  • Take US Agency Debt, a category of obligations of which most Americans are not even aware.  Agency Debt, now at $9.26 Trillion, consists of outstanding debt issued by certain federal agencies such as FHLB and GNMA or government-sponsored institutions such as Fannie Mae and Freddie Mac. You can find more information on Agency Debt on the USGovernmentSpending.com website.
  • Another set of obligations comes from State and Local Debt. The two largest debt amounts are held by California ($155 Billion) and New York ($141 Billion). Total debt with all states combined add up to $3.1 Trillion. Want to know how much each state in the US owes? Check out the Compare State Debt page.

What Does US Government Debt Look Like When All Pieces Are Combined?

What kind of big-picture perspective will we get if we combine the US Federal debt of $21.97 Trillion + US Agency debt of $9.26 Trillion + State-Local Debt of $3.1 Trillion?

The result is a staggering figure of $34.3 Trillion. So, in addition to the Federal debt, we have an additional $12.4 Trillion on top of it. It goes without saying, that the burden imposed by adding a few more trillions is quite significant.

Let’s take this comprehensive picture even further and compare this new total with our nation’s GDP. Right now, minus the additional figures, our national debt stands at 104% over GDP.

But if you incorporate all of the government’s debt, the more accurate figure would be 166% of the US GDP!

$34.3 Trillion Debt Load

166% Debt to US GDP

The Fed and the US Treasury typically don’t include the total debt in their accounting for reasons well understood: the financial ratios will end up looking much more dismal than it would with the current reporting format.

The fact remains that excluding these debts from the official books won’t do anything to erase them. Their negative effects will just filter into the economy well below the strata of public awareness.

At the same time, the Federal debt is forecasted to reach $22.5 Trillion by the end of this year, and $30 Trillion by 2025, according to Statista.com.

Should interest rates continue to climb, the US Treasury will find itself having to pay out $900 Billion a year just to keep up with its obligations.

According to the TreasuryDIrect.gov website, the US Treasury’s interest expense for the first three months of fiscal 2019 (Oct through Dec) was $164 Billion.

This was 12% more than the $147 Billion they paid around the same time last year.

If we assume that the interest expense will continue to increase by 12% for the entire year, we are looking at a figure of approximately $580 Billion!

The US debt is much higher than most Americans perceive.

And when the US economy finally buckles under the weight of its debt:

ASSET VALUES WILL FALL

DEBTS WILL REMAIN STANDING

THE BURDEN OF INTEREST PAYMENTS WILL ONLY INCREASE

This is disaster in its purest form.

So what does this mean for investors and retirees who don’t want to take part in this impending financial catastrophe?

Gold and Silver have nothing to do with US debt. They have no counterparties. And this is why they remain the most valuable safe havens when all other asset values crumble.

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