Uncle Sam Is Broke

More disheartening news from the financial bowels of America. Though there is a shred of honesty in the news, albeit accidental honesty.

First the disheartening news:

Uncle Sam is insolvent, and wildly so.

I just finished going through the Treasury Department’s Financial Report of the United States Government for 2025. Dull reading, I can assure you. But right there on page one, the Treasury lays out the state of America’s financial ineptitude. To wit: $6.06 trillion in total assets… and $47.78 trillion in total liabilities.

Liabilities exceeding assets by such a vast amount is the definition of insolvency.

To put those numbers into family finance perspective, imagine owning $100,000 in financial assets, offset by $778,000 in credit card debt.

For us mortals, bankruptcy is a calling.

Governments, alas, don’t file bankruptcy. They keep going until a crisis emerges, and at that point they monkey with the currency to make the debt less onerous.

Britain followed that path in 1931, when the Bank of England suspended the British pound’s gold convertibility. The pound lost about 25–30% against gold and other currencies. Weimar Germany had to print trillions worth of Deutschmarks to pay for WWI reparations, which had the effect of totally wiping out the debt at the cost of hyperinflation.

Argentina is a never-ending story of financial ineptitude that has destroyed the currency and local savings accounts and purchasing power.

Zimbabwe. Russia. I could go on.

Lots of people remind me that “this is America; that kind of stuff doesn’t happen here.”

Only, it has happened here. In 1933, FDR confiscated gold and repriced it higher, thereby shoring up America’s failing finances. In 1971, Nixon killed the dollar’s convertibility into gold, thereby shoring up America’s failing finances.

Or go back to the Civil War. The federal government was in a financial pickle because it had no way to finance the war with the South. So, Congress passed two acts in July and August 1861, authorizing the Treasury to issue so-called “Demand Notes”— small-denomination Treasury notes of $5, $10, and $20 that were essentially short-term government IOUs.

Those notes were printed with green ink on the back (the origin of “greenbacks”) and they included a promise printed on the front that assured holders that the notes were “redeemable on demand, in coin, at the Treasury of the United States, or at the office of the Assistant Treasurer in the city of New York.”

Alas, not so much.

By late 1861 the war was going badly for the North. Investors and savers were hoarding gold or exporting it abroad. Banks were under enormous pressure.

On December 30, 1861, the major Northern banks collectively stopped redeeming their own bank notes for gold/silver coins. The next day, the US Treasury followed suit and announced it would no longer honor the redemption clause on the Demand Notes.

The US government was openly refusing to pay the exact thing it had promised in writing on every outstanding Demand Note: immediate conversion into gold or silver coin.

All of this to say: Beware a government that is deeply insolvent.

Governments were never created to help the people they govern. They were created to give power to a select few, and those few in turn do all they can to preserve government at the cost of screwing the people.

A misanthropic take on government, no doubt.

But one I feel is quite accurate, as history has proven time and again.

The modern American government is in a bind. Liabilities that are 7.8x larger than assets aren’t sustainable. Worse, that 7.8x is only going to grow increasingly onerous because the US continues to run massive deficits of $2 trillion every year—spending that piles on top of the existing debt.

Assets are not growing by $2 trillion per year.

Moreover, many of the assets aren’t really worth anything. Who’s going to buy the Pentagon?

Who’s going to buy Yosemite?

Many of the assets under “property, plant, and equipment” are items like warships, fighter jets, and missiles… and, well, um… war has suddenly depleted a lot of that inventory—so much so that the US is going to have to spend billions and billions of dollars to replenish all those spent missiles, and the downed aircraft.

And as for the $2 trillion in “loans receivable,” about 60% of that is through the Department of Education for college loans and whatnot… and the government has been forgiving loans for several years now, so you have to wonder how much of that $2 trillion asset is real?

The nut of all of this is that America’s assets are not worth $6.06 trillion because the vast majority of them can’t be sold to anyone, is being destroyed in war, or is being written off completely.

Yet the $47.78 trillion in liabilities is very real. It’s the debt and interest payments that Uncle Sam owes to his people and to lenders around the world. And it is benefits that have already accrued to federal employees and veterans.

At some, modern America will revisit 1861, 1933, and 1971.

The country is going to have to do something to haircut its monumental debts. I can’t tell you what exactly that will look like; many permutations are possible.

All I can tell you is that the reckoning is baked into the cake at this point. The dollar faces a downward revaluation. Which means gold and other assets—Swiss francs, bitcoin, others—face a revaluation upward.

I know gold has been under pressure amid the war. But there’s a reason for that which I will address tomorrow.

For now, I would tell you to use this moment when gold is down to build a near-permanent position in gold, or to add to your gold holdings.

Governments cannot remain insolvent forever.

Now, as for that bit of accidental honesty in the Treasury Department’s report.

It comes in the Secretary’s Message—in this case, that’s Scott Bessent.

A government that lives beyond its means ultimately erodes the foundations of its own strength. Getting our fiscal house in order is not only an economic imperative, it is also essential to preserving the strength and credibility of the United States at home and abroad.

America lives way beyond it means. The numbers are proof. And there are zero tangible indications that America is looking to get its fiscal house in order.

Protect yourself while you still can.