In the latest Money Metals Midweek Memo, host Mike Maharrey highlights the growing U.S. national debt, which now exceeds $35.7 trillion.
Maharrey begins the episode with a reference to the Apollo 13 mission, saying, “Washington, we have a problem.” He draws parallels between the crisis faced by astronauts and the fiscal disaster Washington is ignoring.
Unlike the Apollo 13 team, Maharrey argues that government officials are pretending everything is fine, despite mounting financial problems.
The Fiscal Deficit Breakdown
Maharrey doesn’t hold back in critiquing the size of the fiscal 2024 deficit, stating that “the Biden administration ran the third-largest budget deficit in history,” a troubling reality when paired with the first-ever $1 trillion spent on interest payments alone.
“It’s the first time that’s ever happened,” he emphasizes, underscoring the gravity of the situation.
The final numbers are staggering: the federal government spent $1.83 trillion more than it took in, and the budget deficit for 2024 was 8% higher than the previous year’s.
Mike Maharrey explains that this deficit represents “6.4% of GDP, up from 6.2% in fiscal 2023.”
Borrowing During Prosperity
The fiscal irresponsibility is even more concerning given that these deficits are happening during supposed economic prosperity.
Maharrey quips, “Here we are in what is supposed to be a robust economy…yet we still have these crisis-like budget deficits.”
He posits that the only thing keeping the economy from crumbling is “government deficit spending,” calling into question the strength of the economy as presented by politicians.
He suggests that the appearance of a booming economy might be “an illusion created by government deficit spending,” stating bluntly, “I’m pretty convinced that’s the only thing that’s keeping it from completely going under.”
Government Spending and Tax Receipts
Contrary to popular political narratives, Maharrey argues that the U.S. doesn’t have a revenue problem but a spending problem:
“Federal tax receipts came in at a record $4.92 trillion, an 11% increase over fiscal 2023.” He continues, “The federal government doesn’t have a revenue problem; it simply spends too much money.”
Despite promises of spending cuts during the debt ceiling deal, Maharrey is skeptical:
“Remember how the Biden administration promised that the pretend spending cuts would save hundreds of billions of dollars?” Instead, federal spending surged by “$6.75 trillion, a 10% increase over 2023.”
Bipartisan Fiscal Irresponsibility
Maharrey is clear that the blame isn’t solely on the current administration:
“It’s not just Democrats spending like drunken sailors—and I say that with all due respect to any drunken sailors out there.”
Both parties have contributed to the deficit issue. He points out that the Trump administration was on pace for a $1 trillion deficit in fiscal 2020 before the pandemic hit.
Borrowing and spending, Maharrey notes, is a “bipartisan sport.” He adds,
“The Trump administration almost hit the $1 trillion mark in 2019, and it was on pace to run a trillion-dollar deficit in fiscal 2020 before the pandemic.”
The Rising Interest Problem
One of the most alarming trends Maharrey highlights is the rise in interest payments. In fiscal 2024, the U.S. government paid “$1.13 trillion in interest expense,” marking the first time this figure has eclipsed $1 trillion.
“Interest payments were up 28.6% over fiscal 2023,” Maharrey notes. The government now spends more on interest than on national defense and Medicare, and the only expenditure larger than interest is Social Security, which totaled $1.46 trillion.
Maharrey warns that this interest burden is only going to grow: “Every month, some of that super low-yielding paper matures, and it has to be replaced…with bonds that yield much higher rates.”
Inflation and Monetary Policy
Despite the Federal Reserve’s recent rate cut, long-term bond yields have spiked. Maharrey reports that after the rate cut, “the yield on the 10-year treasury was around 3.7%, [but] we’re just over 4.2% now.”
Meanwhile, the 30-year yield jumped from 4% to “4.5%.” He argues that this is a sign of a deeper problem, one that can’t be fixed by the Fed’s short-term policy changes.
Maharrey explains that the Fed has limited control over long-term interest rates: “The Fed can manipulate short-term interest rates by dictate, but it doesn’t have the same kind of control over long-term interest rates.”
This loss of control is troubling given the U.S. government’s increasing borrowing costs.
Global Reaction and De-dollarization
As the U.S. fiscal situation worsens, global confidence in the dollar wanes. Maharrey notes that de-dollarization is accelerating as countries seek alternatives to the U.S. dollar.
“This is one of the forces that is driving de-dollarization,” he says. “The rest of the world is watching the fiscal chaos here in the United States, and they’re wondering, ‘Why would I want dollars?’”
Maharrey links this trend to the rising demand for gold and silver, noting that “many central banks are buying gold,” which has led to rising prices for precious metals. “Silver is over $35 an ounce,” he says, referencing analysts like Jesse Colombo, who believes we may be in the early stages of a silver squeeze.
Conclusion: The Road Ahead
Maharrey ends with a sobering reminder that Washington’s fiscal irresponsibility is unsustainable:
“Eventually, kicking the can down the road is going to run out of road.” He warns that both Democrats and Republicans are unwilling to tackle the issue, concluding, “Whether Trump wins or Harris wins in four years, the government will be bigger, deeper in debt, and we’ll have less liberty.”
He encourages listeners to consider gold and silver as a hedge against this economic uncertainty.
“This is why people are buying gold,” Maharrey says. “You may want to think about getting some gold and silver now.”
As always, Maharrey closes with a call to action:
“It’s a great time to call and talk to a Money Metals precious metal specialist.” He stresses that it’s better to be prepared now, as financial instability looms large on the horizon.
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