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Soaring U.S. National Debt: A Recipe for Economic Catastrophe? Lombardi Letter 2020-09-23 07:14:00 The soaring U.S. national debt could lead to an economic catastrophe, like a financial crisis. It’s a problem that’s severely ignored at the moment. Here’s the full story. U.S. Dollar,U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2020/09/wooden-blocks-with-the-word-debt-and-the-clock-in-the-hands-of-a-businessman-timely-payment-of-debt_t20_oRlBNe-150x150.jpg

Soaring U.S. National Debt: A Recipe for Economic Catastrophe?

U.S. Economy - By |
US Economy

What Happens if U.S. National Debt Continues to Soar?

The U.S. national debt is surging. If not checked, the immense debt could cause a financial crisis, an economic crisis, and a wide range of other economic nightmares.

Look at what’s happening first…

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The U.S. government is spending money without remorse.

At the time of this writing, the U.S. national debt stands at $26.7 trillion. (Source: “The Debt to the Penny and Who Holds It,” Treasury Direct, last accessed September 4, 2020.) With this, the U.S. is the most indebted nation in the world. No other nation comes even close to having this much debt.

The worst part: the debt amount is expected to get bigger.

Consider this: according to the Congressional Budget Office (CBO), between 2021 and 2030, the U.S. government is expected to incur a budget deficit of close to $13.0 trillion. (Source: “10-Year Budget Projections,” Congressional Budget Office, last accessed September 4, 2020.)

Know this: each dollar of deficit the government incurs essentially goes towards the national debt. The government has to come up with the money somehow. So, simple math here: by 2030, the U.S. national debt could be as high as $39.7 trillion.

Don’t forget: this is based on a very optimistic scenario, and doesn’t really account for major economic slowdowns.

Here’s How a Crisis Could Be Triggered

Now let’s talk about why soaring national debt could create an economic catastrophe…

Historically speaking, whenever a government has borrowed a lot of money without any major sensible plan in mind, it has led to defaults and currency collapses.

At the moment, the U.S. government is one of the most powerful governments in the world, and the Federal Reserve is helping it by keeping the borrowing costs low. As this is happening, the U.S. dollar is still a dominant currency in the world.

The show goes on.

However, you have to ask: what will happen when the national debt goes to $40.0 trillion, or even $50.0 trillion? This could be reality much sooner than anticipated.

Will there be a point where those who have been lending to the U.S. government say, “We want our money back”?  Or, “We will lend you money, but pay us higher interest rates”?

Dear reader, I will say this: with the U.S. national debt surging, we could be closing in on the day when the creditors to the U.S. government step back. Let me also make it very clear: I don’t expect it to happen tomorrow. I expect this to happen slowly and take some time for others to follow.

When that happens, get ready to see the U.S. dollar fall off a cliff.

This will be bad for the world as well. The dollar has been the backbone of global trade and the financial system. With that said, economic crisis and immense financial misery could follow.

As I look at the U.S. national debt, I can’t help but pay attention to gold. It seems cheap given how big of a problem national debt is becoming.

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