Could 2028 Be the Next 2008?

They say that if you give enough chimpanzees enough time at a typewriter… one of them will bang out Shakespeare.

Today, I shall introduce you to a very smart chimp…

Me.

This headline is proof:

Why Rising Government Debt Has Investors Watching Long-Term Rates

That ran atop a Forbes column yesterday from a contributor who heads up the bond division of an investment firm.

The story echoes what I’ve been warning about for quite some time (because I’m a smart chimp).

Namely, US interest rates are at such a level that the impact on Uncle Sam’s pocketbook borders on calamitous…

Interest payments alone on US debt, as I’ve noted many times, will now top $1.4 trillion for fiscal-year 2024.

In case you’re wondering: The White House budget had America shelling out a projected $890 billion in interest payments for 2024… but, hey, what’s an additional $500 billion or so?

The White House projects net debt repayment for 2025 at $969 billion.

Given that we’re already well past $1 trillion in 2024, I’m gonna go out on a very sturdy limb to say that this time next year, I will be sending you a dispatch explaining how America’s debt repayments are approaching $1.7 trillion (just a guess, but I feel pretty safe with that number).

All of which circles back to the Forbes story…

Surging debt payments are bad news. No shock in me telling you that, certainly. But this surge is just painful to even look at.

Here’s a graphic from the Forbes story:

The line I care about is the yellow one. That is the visual definition of a “moon shot”—nearly straight up.

The information I care less about in that chart is the data axis on the left—percentage of GDP.

I frankly do not care that interest payments are 3-point-some-odd percent of GDP. That tells me nothing useful really.

What I care about is the number the media never seem to write about: debt payments as a percentage of the budget. That’s where the blubber meets the road.

For 2025, the White House says it will spend $6.95 trillion, on revenue of just $5.09 trillion. So there’s a nice, chunky $1.87 trillion in added debt we’ll have when the next fiscal year ends.

But think about $1.4 trillion in interest payments in terms of projected spending.

It’s more than 20% of the budget.

And you know without question that $1.4 trillion isn’t the right number. It’s too low. That’s a 2024 number. Next year will certainly be higher.

All that money is effectively wasted money. We got nothing for it. It’s not like Uncle Sam went into hock to build new schools or whatever. He’s literally paying interest on interest on interest on interest… It’s non-productive money in terms of growing the economy.

In fact, it holds back the economy because every dollar that investors stuff into Uncle Sam’s pocket by way of buying his Treasury paper is money that doesn’t go into the productive economy.

Thus, the economy grows at a much slower pace.

But even that isn’t what burns my biscuits…

It’s that we are well past the tipping point and almost no one cares.

Higher rates are leading us to a crisis because they are forcing America to borrow increasingly more to cover interest payments on increasingly larger sums of debt on which those higher interest rates are applied.

We’ve seen this movie before, back in 2007.

Homeowners went bankrupt because they over-borrowed to play the real estate market, dead certain that real estate prices always go up and that interest rates always remain low.

The minute rates went up, all kinds of hell unleashed on the mortgage market and you know what happened next.

What’s happening today with the US government is not so different.

Sure, the government can print money to escape a financial jam. But that just worsens the issue because all those new dollars destroy the value of existing dollars, and it means more and more debt that the government has to pay off.

I’ve predicted before that the debt crisis will come to a head for America around 2027-2028…

I could keep on going here. I could detail the destruction of a debt cyclone and the nasty impacts that will have on American families…

But instead, I want to leave you with an upbeat message.

You know the phrase “push on a balloon in one spot and you create a bulge somewhere else.”

Well, that’s exactly what’s going to happen.

And the bulge on the other side of the balloon is going to be assets that rise when the dollar falls (and the dollar most certainly will fall as America’s debt crisis takes root).

Those assets are gold, Swiss francs, and bitcoin.

I know it’s repetitive for me to say that yet again. But no one succeeds at anything without repeating the same actions over and over again. Muscle memory, they call it.

And, well, I am helping you exercise your wealth muscle so that you can succeed when the crisis hits…