Washington D.C. has a problem!
A $35.7 trillion problem.
And yet most people don't seem concerned about excessive government spending, massive budget deficits, and the growing national debt.
In this episode of the Money Metals' Midweek Memo, host Mike Maharrey explains why people should be concerned. He digs deep into the numbers and points out some signs that the ramifications of the government's borrow-and-spend addiction and the spiraling debt are already reverberating through the economy.
Mike opens the show recalling the famous statement by Apollo 13 astronauts -- "Houston, we have a problem!"
"Now, imagine for a moment that after hearing this news from Apollo 13, mission control in Houston just went on with business as usual. That’s pretty much what the government people in Washington D.C. are doing. There’s a problem, and they’re pretending that there isn’t. It’s a big problem too – over $35 trillion worth of trouble."
Mike notes that the Treasury Department recently released the final 2024 deficit numbers.
"Here’s the short version: the Biden administration ran the third-largest budget deficit in history in fiscal 2024 and paid over $1 trillion just on interest payments on the debt for the first time ever. I’ll say it again – Washington, we have a problem!"
Mike points out that this is the kind of deficit spending you would expect in a deep economic recession. And yet here we are when the economy is supposedly booming.
"Perhaps the 'robust' economy is just an illusion created by the government deficit spending."
Mike runs through the data, giving a thorough overview of the U.S. government's fiscal situation. He makes the case that the root of the problem is on the spending side of the ledger.
"Remember how the Biden administration promised that the pretend spending cuts would save 'hundreds of billions' with the debt ceiling deal, aka the misnamed Fiscal Responsibility Act? That never happened. The Biden administration blew through $6.75 trillion in fiscal 2024, a 10 percent increase over 2023 spending. This tells you everything you need to know about government promises of spending cuts."
Mike points out that this isn't just a Biden or Democrat problem. The Trump administration also ran massive deficits. Spending is a bipartisan sport.
Mike goes on to explain why officials in D.C. won't take any serious steps to address the problem. It's just not politically viable.
"What is the overarching goal of a politician? No, it’s not serving the people. It’s not making the world better. It’s getting reelected. And guess what? You don’t get votes by cutting spending and raising taxes. So, politicians are always going to keep up the borrowing and spending because that’s what the electorate wants. Now, what the electorate needs are grownups who will say no. But that ain’t happening."
One problem stemming from the massive budget deficit and growing debt is already manifesting - the rapidly upward spiraling interest payments on the debt. Uncle Sam paid $1.13 trillion in interest expense in fiscal 2023. It was the first time interest expense has ever eclipsed $1 trillion. Interest payments were up 28.6 percent over fiscal 2023 levels.
But why should we care? After all, the debt has been growing for decades and nothing really bad has happened.
Well, the fact is the growing national debt and the mounting fiscal irresponsibility undermine the dollar. We're starting to see this manifest in de-dollarization.
"The rest of the world is watching our fiscal chaos and wondering, why would I want dollars? It’s exactly why so many central banks are buying gold and why the dollar’s share of reserves is dropping. And of course, it spills over into the broader economy. Debt leads to lower economic growth, higher unemployment, and less investment wealth."
Mike explains this dynamic using an analogy.
"Now think about this: if you have a friend who is an irresponsible spender and is already up to his eyeballs in debt, would you lend him money? Yeah. No. In the same way, a lack of confidence in the U.S. fiscal situation could also lower demand for U.S. debt. This would force interest rates on U.S. Treasuries even higher to attract investors, exacerbating the interest payment problem. Guess what. This is exactly what seems to be happening."
Mike points out that despite the recent supersized Federal Reserve rate cut, bond yields are going up.
Interestingly, the price of gold has continued to set records despite this headwind.
So, what are rising bond yields telling us?
"This reveals a dirty little secret: the Fed can manipulate short-term interest rates by dictate, but it doesn’t have the same kind of control over long-term rates. And this is a big problem for the federal government as it struggles with rapidly increasing borrowing costs."
The conventional wisdom is investors are now expecting the economy to be stronger moving forward. Therefore, the Fed may have to cut rates at a slower pace.
"This is certainly plausible, but given that the economy really isn't all that strong, and a lot of that 'strength' has been purchased with government borrowing and spending, it would behoove us to consider some other factors."
Mike points out two other explanations for rising bond yields.
"First, rising rates on the long end of the curve could indicate investors are worried about higher price inflation in the long term. When inflation expectations rise, investors demand higher returns on bonds in order to compensate for a depreciating dollar. Second, rising bond yields could indicate sagging demand for U.S. debt."
This indicates that it is quite possible that the Fed won’t be able to lower federal borrowing costs with even with deeper interest rate cuts. In order to settle the bond market, it may have to resort to quantitative easing.
Of course, QE is inflationary.
"In other words, the Fed is between a rock and a hard place. It needs to get interest rates down for the Treasury. Yeah, Fed officials claim they don’t care about the government’s fiscal issues, but I call BS. But intervening runs the risk of reigniting price inflation, which isn’t exactly dead and buried. I think this is part of the reason gold keeps rallying. I think smart people recognize the inflation monster is just sleeping. I think they realize the Fed is going to have to ease monetary policy much more than they’re advertising."
And that leads to the call to action.
"And this is why you might want to think about getting some gold and silver now. We may get a correction now that we’re over $2750, but I wouldn’t count on it. So, now is a great time to call 800-800-1865."

About the Author
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.