Red Ink Rising

U.S. Government Just Hit $1 Trillion in Interest Expenses, and It's Devouring America's Future

The U.S. government has just crossed a financial Rubicon that should alarm every taxpayer in this country. Interest payments on our national debt have exceeded $1 trillion for the first time in history.

Keep in mind, this isn't about paying down the principal – it's purely the cost of servicing Uncle Sam's monumental debt.

To put this in perspective, this interest payment surpasses the entire GDP of most countries. It's larger than the economies of the Netherlands or Turkey, and nearly double that of Thailand.

It also dwarfs what we spend on defense, that sacred cow of the military-industrial complex. It's also more than we waste on boondoggles like Medicaid. Hell, it's multiples of what we squander on the government's failed attempts to educate our children or maintain infrastructure.

In fact, it's the second biggest category in the government budget, behind only Social Security. Just take a look at the next graph.

Now, here's where it gets truly terrifying. This $1 trillion interest bill represents a staggering 28% increase from last year. That's not a typo. In just one year, the cost of servicing our debt jumped by nearly a third. Take a look at this insane spike in the chart below.

What this means in practice is that every single day—including weekends and holidays—the U.S. government pays out about $3 billion in interest. That's $3 billion that could be repairing our infrastructure, funding scientific research—if you believe the government can do a good job of these things—or simply not being extracted from the pockets of hardworking Americans. Instead, it's sent to U.S. debt holders, including those in Japan, China, and other foreign countries.

And it really is a terrifying amount that gets extracted... Let's take last month for instance.

According to the latest Monthly Statement of the U.S. Treasury (page 9) gross interest paid in August amounted to $92.3 billion. That's a whopping 67% of the $137 billion the government collected in income tax receipts (page 4).

Note: “Gross interest" is the interest paid on U.S. Treasury debt held by the public (both domestic and foreign sources), as well as interest paid to U.S. government trust funds (like Social Security) and other government accounts holding U.S. debt.

Put simply, 67 cents of every dollar you paid in income tax in August went to cover interest on the debt.

Just the Beginning

But if you think that's bad enough, brace yourself—we're just at the start of this fiscal nightmare.

Remember, we're staring at $35.4 trillion and counting in national debt. As this debt mountain grows, so will the interest expense.

What about the Fed's recent rate cut? Shouldn't that help?

Lower rates might nudge daily interest payments down a bit, sure. But given how rapidly the national debt is ballooning, it's hardly a silver bullet. At the current rate, the government is adding a trillion dollars every 100 days.

Even their own projections admit that interest costs are set to skyrocket over the next decade, from $1.089 trillion to $1.7 trillion by 2034. How sustainable is that?

It’s not.

And considering we weren't supposed to cross the $1.084 trillion mark until 2027, these estimates are clearly far too optimistic.

Now, the politicians and bureaucrats in Washington will tell you not to worry. They'll spin tales of "managed debt" and "fiscal responsibility." But let's call this what it is – a slow-motion train wreck.

So what can you do?

First, wake up and realize this isn't a problem for future generations anymore; it's happening right now.

Second, pay off your personal debts. With potential scenarios like sky-high interest rates, dollar devaluation, or anything in between, your financial future is more uncertain than ever. The best policy is to avoid owing too much money to anyone.

And equally important, start investing in tangible assets that can't be easily inflated away by government money-printing.

Regards,

Lau Vegys

P.S. A good way to protect yourself from this crisis is to convert as much government currency as you can into real money: gold. The metal's track record speaks for itself, which is why Doug consistently recommends holding it in your long-term investment portfolio. For potentially greater profits, he also recommends investing in gold stocks. That's why a significant portion of our Crisis Investing portfolio focuses on these stocks, which Doug himself owns. Incidentally, we're releasing a new issue on Monday featuring a fresh gold stock recommendation.