..this is a very sobering take from Porter Stansberry depicting the gravity of America's dire state.
..and under President Trump's watch.
The U.S. will default on its Treasury debt within four years. This is inevitable.
And, as these risks get priced into the markets over the next four years, we're going to see an epic financial crisis.
Many elite financial institutions know this is what's happening and, if you look carefully, you can spot their warnings.
Last week Moody's wrote:
"The evolving U.S. government policy agenda on trade, immigration, taxes, federal spending and regulations could reshape parts of the U.S. and global economy with significant long-term consequences... Fiscal strength is on course for a continued multiyear decline and there are increasing risks that the deterioration in U.S. fiscal strength may no longer be fully offset by its extraordinary economic strength."
What does that mean?
It means the U.S. government is bankrupt and these financial problems are about to spill over into the real economy.
Let me show you why a default is inevitable.
First, let's assume Musk is able to cut the budget by $500 billion. I'll believe it when I see it. But, let's assume DOGE is successful. Even so, spending will not decline! Why not?
Because of Social Security, Medicare, and Medicaid.
Here are the facts:
* Social Security and Medicare spending is growing by ~$180 billion annually. By 2028 that's $3.5 trillion a year. This spending is mandated by Congress and it is politically impossible to cut.
* Medicaid, grows with population and inflation (3% to 4% a year). By 2028 that's $2 trillion a year. This spending is mandated by Congress and it is politically impossible to cut.
* Defense and discretionary spending. Here's where Elon cuts $500 billion! Congrats! 2028 estimated defense and discretionary spending: $1.1 trillion ------------------------- This spending takes us to $6.5 trillion a year by 2028.
But... everyone is forgetting about the giant elephant in the room: the interest on the government's debt.
No one can forecast what future interest rates will be, in part because we've never in the history of our country had to finance debts this large. Between now and 2028, the Fed has to refinance $21 trillion!
The Congressional Budget Office predicts rising deficits over the next four years, with an estimated $9 trillion in new federal borrowing expected. So with debt coming due and the new money to borrow, the government will need to sell $30 trillion worth of U.S. Treasury bonds to investors over the next four years.
Simple question: how are we going to sell $30 trillion worth of bonds when Trump is actively fighting a trade war against all of our largest creditors?
Foreign countries collectively hold $8 trillion in U.S. Treasury securities, or about 27% of all of the debt that's held by the public. What are these investors doing with our bonds? They are dumping them as fast as they can and buying gold instead. After the COVID $7 trillion printing extravaganza, the foreign central bank gold-buying spree grew to record levels. The World Gold Council (“WGC” reports record purchases of 1,136 tonnes in 2022 and 1,037 tonnes in 2023. For 2024, full-year data shows 1,000+ tonnes again. That’s roughly $75.2 billion worth of gold, annually. You might have noticed soaring gold prices. That's an indication that the U.S. dollar is losing its status as the world's reserve currency. Ever since 2010, after we bailed out Wall Street by printing trillions, central banks have been buying more and more gold. And Treasury purchases? In 2024 foreign central banks were net sellers of Treasuries in 2024 – minus $200 billion!
So, who is going to buy $30 trillion in Treasury bonds over the next four years? We can't possibly afford these debts. Total U.S. domestic savings are about $5 trillion per year. Even if 100% of all of the savings in the U.S. went into Treasury bonds over the next four years, we still couldn't finance these debts. Remember Econ 101?
What happens when demand exceeds supply? The price must rise to until the market clears. The same thing is true about the market for U.S. Treasury bonds. The price -- interest rates -- required to sell those bonds is going to go up, a lot. Higher interest expenses will render Musk’s efforts to cut government spending irrelevant. Even if you only assume 6.5% interest rates, the government’s 2028 financing costs will be over $2 trillion! And so by 2028 the government will still be spending $8.6 trillion a year and continuing to rack up bigger deficits. That's also about the time that Social Security will fail.
What? Wait, isn't there a "Trust Fund" made up of all the money that we've been paying into the system since we started working? Absolutely not. Social Security is simply a tax that’s paid in part by your employer. You have no legal rights to any benefits whatsoever. Don’t believe me? See Flemming v. Nestor, where the U.S. Supreme Court ruled that you have no property rights whatsoever through the Social Security system. And there isn't a trust fund anyways. What the Social Security system “invests” in are government bonds, bonds that have been, since 2020, collapsing in price as interest rates continue to rise. There is no way these “assets” (which are also government obligations) can possibly fund the existing obligations of Social Security and Medicare. The existing obligations are $70 trillion. Conservative estimates project that the Social Security system will be insolvent in a decade, but that's only because nobody is modeling the ongoing declines in Treasury bond prices and because the assumptions on rising medical costs are far too conservative.
The reality is... our government owes foreign creditors and Social Security recipients more than $100 trillion. Our government is bankrupt. And it's only a matter of time before it defaults. Nothing Musk is doing will change those facts.
reports record purchases of 1,136 tonnes in 2022 and 1,037 tonnes in 2023. For 2024, full-year data shows 1,000+ tonnes again. That’s roughly $75.2 billion worth of gold, annually. You might have noticed soaring gold prices. That's an indication that the U.S. dollar is losing its status as the world's reserve currency. Ever since 2010, after we bailed out Wall Street by printing trillions, central banks have been buying more and more gold. And Treasury purchases? In 2024 foreign central banks were net sellers of Treasuries in 2024 – minus $200 billion!
