Nick Giambruno, writing for International Man, highlights seven critical indicators suggesting the potential collapse of the US dollar as the government spirals deeper into a debt crisis. The first indicator is federal budget deficits, which are projected to exceed $22 trillion over the next decade, based on unrealistic assumptions such as stability in foreign affairs and economic cycles. This trajectory of increasing deficits indicates a pattern of accumulating debt that requires ongoing financing through new debt issuance, exacerbating the nation’s fiscal predicament.
The second indicator is the federal debt, which has surpassed $35 trillion, amounting to over 123% of the Gross Domestic Product (GDP). Critics point to the flawed nature of GDP as a measuring stick for economic health, as it accounts government expenditures positively, diminishing the true extent of debt. Given that government spending constitutes about 37% of GDP, the debt-to-GDP ratio reflects a more dire economic reality than often presented.
Giambruno underscores the importance of the federal interest expense, now exceeding $1 trillion annually, making it the second-largest item in the federal budget after defense spending. The projection suggests that interest costs will soon eclipse Social Security as the largest expenditure. This trend raises questions about the government’s fiscal sustainability, as soaring interest expenses could threaten the US government’s solvency, necessitating measures like maintaining lower interest rates to manage debt servicing costs.
The federal funds rate, significantly impacted by events like the 2008 financial crisis and the COVID-19 pandemic, represents the fourth critical indicator. After years of near-zero rates, the Federal Reserve instituted one of the most aggressive rate-hiking cycles in history in response to inflation hitting 40-year highs. However, faced with skyrocketing interest expenses, the Fed has pivoted back to monetary easing, raising concerns about the ongoing battle to control inflation while keeping debt costs manageable.
Money supply emerges as the fifth alarming indicator, ballooning by 37% since 2020 as the Fed employs measures such as purchasing Treasuries with newly created money to maintain interest cost controls. This monetary debasement threatens the real purchasing power of the dollar, further eroding individuals’ wealth unless their after-tax income has similarly increased — a challenge for many Americans.
The Consumer Price Index (CPI), often manipulated for political purposes, serves as the sixth indicator of economic distress. Criticized for its inability to accurately reflect the diverse buying experiences of the American populace, the CPI is deemed a misleading tool by Giambruno. Consequently, he suggests monitoring the CPI not as an accurate inflation measure but rather as an indication of the Federal Reserve’s actions and rhetoric. Finally, Giambruno emphasizes the significance of gold prices, positing that gold is the ultimate form of money due to its enduring value. As the dollar faces potential debasement amidst ongoing monetary easing, the author anticipates soaring gold prices, urging investors to consider holding physical gold in private storage to safeguard against economic uncertainty.