Gold May Be A Shiny Idea with National Debt Issues Looming

I think it is quite safe to say that most Americans know that the U.S. government is in trouble when it comes to finances.

The current national debt is roughly around $22.5 trillion. At the rate things are going, many foresee 1 trillion dollars being added to that amount every upcoming year. However, there’s a high probability that we may be breaking the camel’s back very shortly that can get things into even worse shape than before.

One of the factors our federal government has been capable of carrying on all this debt over the past number of years is due to the very small interest rate-setting caused by the monetary stimulus that the Federal Reserve created—a byproduct of the 2008 financial crisis. With near-zero short-term rates and the lowest long-term rates ever in our country’s history, the federal government decided to benefit from these rates to operate in massive quantities of stimulus expenditure. This is the reason why in 2012, the government paid the same amount of interest on approximately $16 trillion as they did in 1998 when it was $5.5 trillion.

Just like with everything in life, there needs to be a balance. When things are high, things swing low, and vice versa. And it shows: there has been an increase in the most recent years where our county has been paying all-time high interests to maintain our country’s debt. The U.S. government paid the highest ever interest amount of $523 billion, which will be surpassed by the 2019 amount that will be paid.

Indeed, economists now predict that every new U.S. government debt repayment starting in 2024 will exclusively be used to pay the national debt’s interest. The interest in 2021 is foreseen to be anywhere from $700 billion to approximately $1 trillion a year. From 2024 and on, unless there was some radical shift on spending within the federal government, each dollar assigned to deficit spending will go towards maintaining interest payments on the current debt. And since the debt will not be touched, these deficits will create more interest — a neverending cycle.

This cycle will continue, at least until the issuance of debt eventually gets out of hand, which will have the interest rates rise, and new debt untouched by buyers, which can just have everything collapse. 2024 is only five years away from now. How will this affect you and your retirement? Are you prepared?

Just like the national budget as a whole, social security is also in poor form. Many experts say that 2035 is the forecasted year that the Social Security program will run out of funds. When this happens, the country will need to increase taxes or issue additional debt to finance S.S. benefits. Can we even get to that point, though?

The government is projected to begin liquidating Social Security in the year 2020. The government will need to come up with the money to do this since the trust fund assets are non-marketable Treasury securities. This means that we have to buy up these securities. This will mean the new issuances marketable Treasury securities, which will also add new interests to the current spending.

If things spin out of control with our national debt way too quickly, our Social Security program will probably no longer exist by the year 2035. By then, expenditure paying the debt’s interest may be so incredibly high that it will swallow the benefits of S.S.

For those in retirement, Medicare is another government program that will drastically impact their lives as most are forced into the program when they are 65 years old. Although the expenses of Medicare isn’t anything like Social Security, the cost will eventually increase very quickly as more and more of the baby boomer generation sign up for Medicare.

Forecasts show that Medicare may be completely dry in the year 2026. There may be a deduction of over 10% of what the federal government will be able to distribute in benefits for Medicare. They may need to hike up the cost of healthcare to compensate for the loss. However, that would still be another negative impact on senior citizens on top of Social Security and Medicare depletion scares.

There may be other things that may be affected—there may be some difficult economic measures that need to be established over the next 5-10 years without a drastic reform on government expenditures. Many Americans like to ignore that our Congress had a problem with overspending. A lot of them may put the blame on there being a revenue issue. However, that can be contributed to our Congress not really even attempting to change their way of spending on things they think have priority—which isn’t Social Security and Medicare. No, those programs are generally left on the back burner as they act like it is surprising that they are overspending, and the programs are at risk of going broke.

New debt issuance has been the band-aid to the so-called revenue issue. However, when the debt issuance is forced to pay off national debt’s interest solely; when the costs of Medicare and Social security skyrocket, the government will really have to take action. Where will they raise the money from? Taxes. Over the decades, we have had a decrease in taxes, but in the near future, we may just see them go up to what they used to be or even higher.

With higher taxes come lower spending activity as this will put a significant dent in the average U.S. family unit, which in turn will hit our economy. More than likely, many programs like pension accounts, retirement plans will not be safe from being reformed with budget cuts or being taxed higher to pull more funding into the national budget.

Smart buyers are going to safeguard their investments and money against this upcoming danger. This usually implies buying up gold—a crowd favorite in being loyal to guarding many investors for hundreds of years. With many assets and properties that can just disappear electronically, gold ownership offers security and sustainability that electronic investments cannot.

Keep in mind, the eventual financial meltdown of the country will not happen in the blink of an eye. We have all seen the pieces align for years and years. We are all within a decade from seeing how ridiculous deficit expenditures will play out within our economy. ⠀Will your retirement savings be protected from this onslaught?