U.S. Climbs Above Cape Verde in World's Top 10 Most Indebted Countries List

Chart of the Week #14

Earlier this week, I wrote to you that the U.S. has smashed through a historic fiscal milestone of $35 trillion in national debt.

That’s about 129% of America’s Gross Domestic Product (GDP). We’re talking about 1.3 times the amount of economic output we produce each year.

This staggering level of debt places us alongside nations like Venezuela, Sudan, and Lebanon on the list of the top 10 countries with the highest debt-to-GDP ratios. In fact, passing the $35 trillion debt mark has bumped us ahead of Cape Verde on that infamous list.

Now, when a country's debt exceeds a certain threshold relative to its economy—typically more than 120%—something tends to break. And usually, it's not just one thing.

If you take a closer look at those countries on the list, you should see what I mean. Even if we exclude the four basket-case economies I mentioned earlier, none of these places are exactly beacons of security, stability, or economic power (with the exception of Singapore). Even Japan, once a powerhouse, is now a mere shadow of its former self, with a projected GDP growth of only 1% this year. Not exactly a great club to be a part of.

And here’s the key takeaway. If the rate persists, the U.S. will be deeper in debt relative to its economy than Italy in 2027, deeper than Lebanon in 2029, Eritrea in 2031, Sudan in 2033. Going beyond a decade, America will surpass Venezuela by 2038 and even Japan by 2041.

This is THE real crisis of our times.

Keep in mind, unlike a country like Japan, the U.S. doesn't benefit from having around 90% of its debt owned domestically. Around $8.1 trillion of U.S. government debt is currently held by foreign nations. The U.S. can't just bank on foreigners to keep buying its debt as more of them start distancing themselves from the dollar (and its debt-to-GDP ratio exceeds that of Lebanon and Eritrea).

Neither can the U.S. just default on it because it would be political suicide for those at the top. So the only way for those in power to bail out the system is through the devaluation of the dollar (and the government’s debt).

Many think currency devaluations only occur in economically weak nations or places that are still developing, like those in Africa or Latin America. But I urge you to take another look at the list of countries the U.S. is currently keeping company with.

Regards,

Lau Vegys

P.S. Protecting yourself from this crisis is simple: convert as much government currency units as you can into real money: gold. The metal’s track record speaks for itself, which is why Doug always recommends holding it in your long-term investment portfolio while investing in gold stocks for even more profits. That's also why a big part of our Crisis Investing portfolio is focused on these stocks, which Doug himself owns. And we just published our latest issue yesterday.