Dangerous Rhetoric and Soaring U.S. National Debt: This Could End Badly Lombardi Letter 2018-11-12 11:53:30 The U.S. national debt continues to soar as the federal government spends without remorse. It must be questioned what will happen as the government picks trade fights with major economies that are also major creditors. News,U.S. Dollar,U.S. Economy

Dangerous Rhetoric and Soaring U.S. National Debt: This Could End Badly

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Soaring U.S. National Debt

U.S. National Debt Continues to Surge, Deficit Grew 17% in 2018

If you are not watching the U.S. national debt and listening to the rhetoric that the U.S. government has been using against other major economies, you could be making a big mistake. What the government is doing could cause a lot of problems in the coming years.

At the time of this writing, the U.S. national debt stood at $21.7 trillion.


This figure is growing.

The U.S. government is spending without any remorse. In fiscal-year 2018, which ended in September, the U.S. government had a budget deficit of $779.0 billion. In fiscal-year 2017, the budget deficit was $665.8 billion. (Source: “Final Monthly Treasury Statement,” U.S. Bureau of the Fiscal Service, last accessed October 31, 2018.)

Doing some simple math here, this represents an increase of close to 17% year-over-year.

You see, every dollar of the budget deficit has to be financed, and it all gets added to the national debt.

The worst part is that there’s no budget surplus in sight for at least the next 10 years. The debt figures we see now could get much bigger. In less than a decade, debt could soar to as high as $30.0 trillion (if not more).

Mind you, the U.S. government has to pay interest on its debt. So, the higher the debt, the higher the debt service payments. In fiscal-year 2018, the U.S. government paid $521.0 billion in interest payments alone.

Why Worry About the Rising National Debt?

Let’s get one thing straight: the U.S. is the most indebted nation in the world when looking at the nominal value. No other nation even comes close to it.

How does the U.S. fund its budget deficits? It sells bonds on the market. Investors who buy U.S. bonds are essentially the creditors.

Here’s the problem: as it stands, the U.S. government is picking fights with major nations. For example, President Donald Trump has been adamant about putting tariffs on the Chinese goods coming into the country.

The U.S. government has also placed tariffs on goods coming in from close and friendly nations. For instance, the U.S. has placed tariffs on Canadian steel and aluminum. Cars coming in from Europe are being scrutinized as well.

Remember how I said that the U.S. government sells bonds to creditors? This rhetoric of picking fights with major nations could be a very dangerous venture. China, for instance, owns a lot of U.S. debt and buys more at times. Central banks around the world hold a lot of U.S. debt and they buy often, too.

Skyrocketing Inflation, a Tumbling Dollar, and Diminishing Buying Power Could Be Ahead

Imagine if major creditors to the U.S. government suddenly say, “Look, we will not lend you any more money.” What do you think will happen?

If creditors to the U.S. stop funding the deficits, it would create a massive problem.

First of all, the credibility of the U.S. government could be on the line.

Then, the U.S. dollar could be hurt severely. The dollar holds up its value because it’s trusted around the world as a currency backed by a stable government. Creditors refusing to finance the U.S. government’s spending could be a very bad situation for the dollar.

Lastly, no matter how you look at it, American consumers could be in a lot of trouble. A plummeting dollar would mean surging inflation. This would hurt consumer spending and everything that revolves around it.

Dear reader, if the U.S. government keeps up the rhetoric against other countries, and the U.S. national debt continues to soar, we could be in for a lot of financial trouble sooner rather than later.

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