America's $65 Trillion Problem

The Only Way Out Is the Printer

As if you needed any more reasons to own gold these days, here’s another one — straight from Washington itself.

A few months ago, the Congressional Budget Office (CBO) published its latest Budget and Economic Outlook. Almost nobody read it. CBO's job is the dry, technical paperwork of projecting where federal finances are headed. They publish on a schedule. The financial press mostly ignores them.

Add up the projections inside, though, and one number jumps out. $65 trillion.

That’s where total U.S. federal debt sits in just ten years’ time. The path CBO sees is straightforward. Annual deficits hold above $2 trillion for the entire next decade and climb to $3 trillion by 2036. That’s roughly $25 trillion of new debt piled on top of the nearly $40 trillion the federal government already owes — and all of it added in barely a decade. Not a generation. A decade.

By the end of the path, interest expense alone runs to roughly $16 trillion cumulative over the decade. That works out to an average of about $1.6 trillion a year. We start at roughly $1 trillion in annual interest payments today, and by 2036 that figure doubles to over $2 trillion. Remember, Washington is already spending more on interest than on the entire defense budget. Already roughly on par with Medicare. Second only to Social Security.

Now let me put $65 trillion in some context, because honestly, the figure is so mind-bogglingly big it’s hard to properly grasp. $65 trillion works out to about $190,000 for every American man, woman, and child alive today. Roughly $500,000 per household. Thirteen times what the federal government collects in taxes every year. More than what the entire U.S. economy produces in two years. And as you’ll see in a moment, it’s a load the country has no realistic way to repay.

Three Escape Valves Washington Doesn’t Have

So how does a country dig out from under that kind of debt? History offers three ways. None of them works in our case.

Tax it. The federal government already extracts about $5 trillion a year from American taxpayers — many of whom never asked for the spending it’s now trying to pay off. Even if you cranked every tax line to politically impossible heights — corporate, personal, capital gains, payroll — you still couldn't close a $2 trillion annual deficit and dig out from under the $40 trillion pile. Plus, higher taxes drag the economy down, which means lower receipts the year after. The U.S. has never enacted a peacetime tax-and-austerity package that closed even half a hole this size. It won’t enact one now.

Grow into it. To meaningfully bring the debt-to-GDP ratio back down without raising taxes, you’d need sustained real GDP growth above 3.5% for a decade. We haven’t seen that since the 1960s — and the U.S. pulled it off then with a young labor force, cheap domestic energy, the world’s most dominant manufacturing base, and a dollar that was still tied to gold. None of those things apply today. America has an aging population, a manufacturing base shipped off to Asia three decades ago, and real wages that have been basically flat since the early 1970s. The math doesn’t bend. And nothing on the political horizon is going to make it.

Default on it. Formally defaulting on U.S. Treasury debt would be political suicide for those at the top — and it would blow up everything else with it. Reserve-currency status. Global banking plumbing. The whole postwar architecture. It’s unthinkable. So they won’t.

That leaves one path. They will print.

Not “may.” Will.

When the Printer Comes Back On

Now, here’s where it gets even more tricky.

Every previous round of money printing in living memory was done into a deflationary (or at least disinflationary) economy.

Think back to 2008, the year of the global financial crisis. CPI actually went negative by year-end (and again in 2009). The Fed responded with the first-ever round of quantitative easing — buying trillions in mortgage and Treasury assets.

Or take QE2 in 2010 and QE3 from 2012 to 2014. Not crisis responses, but the cover was still there: below-target inflation, sluggish growth.

Or 2020. Many people don’t realize this anymore, but before the Fed cranked up the money printer to combat the government’s own self-created problem of COVID lockdowns, CPI was running barely above 1%. The Fed then proceeded to do the biggest single round of money printing in U.S. history — $3 trillion in three months.

You know how each of those rounds ended — in asset bubbles, and in 2020’s case, in the worst inflation in four decades. That was with deflationary cover.

In 2026, there is no cover.

Thanks to Trump’s reckless war in Iran, we now have a textbook supply shock on our hands. Food prices are running at 7.9% year over year. Gasoline is up 40% in twelve months. Fertilizer is up more than 100% since February.

And it doesn’t look like anything the Fed — or Trump, for that matter — can do is going to reopen those shipping lanes anytime soon. So when the Fed is eventually forced to print into this setup, they’ll be pouring monetary fuel on a fire that’s already burning structurally.

How Does That Play Out?

To answer that, look at the closest parallel in U.S. history — the late 1970s. Specifically, 1979.

Coincidentally, that crisis also started in Iran. In January of that year, the Iranian Revolution toppled the Shah. Iranian oil output collapsed. Crude prices nearly tripled. The shock worked its way through the economy the same way today’s is working through ours.

The result was stagflation. Inflation hit 13.5% in 1980. Unemployment eventually climbed past 10%. And gold went vertical: from roughly $200 at the start of 1979 to $850 by January 1980. A 4x move in thirteen months.

Now consider what’s different this time, and where it’s worse.

In 1979, debt-to-GDP was around 32%. Today it’s already 125%, headed to 150%, then 175%, and ultimately past 200% if the trajectory holds. Also, in 1979, the Fed still had the option of a Volcker-style rate shock.

Note: Paul Volcker took over as Fed Chair in August of that year and, over the next two years, jacked the federal funds rate from about 11% to a peak of 20%. It triggered back-to-back recessions, knocked the housing market flat, sent unemployment past 10%. But it broke the inflation — the same inflation, mind you, that a decade of Fed money-printing had created in the first place.

The Fed today doesn’t have that option. The debt math doesn’t allow it. Push the funds rate anywhere near 20% against $40 trillion of federal debt, and you blow up the budget inside a single quarter.

Then there’s the petrodollar. In 1979, that architecture was brand new — barely five years old, still in its prime, giving the dollar a fresh, structural source of demand the world couldn’t escape. Today, as I wrote earlier this week, it’s running on borrowed time.

So for anyone telling themselves gold has already doubled in two years — I’m probably late to this party, my answer is simple: nonsense. Strap in and keep stacking. The path from here isn’t a few hundred dollars higher. It’s a multiple higher.

Regards,

Lau Vegys