Tavi Costa, who studies big economic trends, is worried. He says that if the U.S. keeps borrowing more money, it could cause big problems. He thinks that if this happens, the Federal Reserve won’t be able to do much to stop prices from going up, which is what happens during inflation. Costa shared his concerns because he thinks the Fed might lose its power to control things if the debt keeps growing.
Costa pointed out something really worrying about how much money the U.S. owes. He mentioned that the U.S. national debt has climbed to over $34.5 trillion, as reported by the U.S. Treasury. This is a huge amount of money and shows a serious problem with how much the country owes.
He also highlighted a report from the Congressional Budget Office, which predicts that the U.S. federal government debt will keep going up. Last year, it was already 97% of the size of the whole U.S. economy (GDP), and by 2034, it’s expected to jump to 116%. This means the government will owe even more compared to how much money the country makes.
This level of debt is alarming because it’s projected to be even higher than what the U.S. had to deal with during World War II, which was a time of immense financial strain for the country.
At a certain stage, the debt issue will become so huge that it will make the Federal Reserve almost powerless. This means they won’t be able to do much, like raising interest rates, to control inflation. Costa explained that if things keep going this way, it could make the Fed’s usual tools ineffective. This paints a grim picture where central banks might find it really hard to keep the economy stable.
Costa sees something positive in what he calls a clear pattern in valuable things, like gold. He thinks this pattern is happening because regular money, like dollars or euros, is losing its value. He believes that many people will start moving their money from things like stocks or bonds into real stuff, like gold or other physical things you can touch.
Costa pointed out that we’ve seen this happen before. Back in the 1910s, the prices of things were going up a lot, and things like gold or land were worth more than things like stocks or bonds. The same thing happened in the 1940s and the 1970s. Costa mentioned these times to show that when there’s a lot of financial trouble, people tend to move their money from things like stocks or bonds into things like gold or land.
To add to the worry, new information from the World Gold Council tells us that central banks around the world have been buying a lot of gold recently. This is important because it shows that even big institutions are moving their money into things like gold. This trend highlights how many people are turning to solid things like gold because they’re unsure about what’s going to happen with the world’s finances.
