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The United States government is still spending money that they don't have and now they need to incentivize more people to lend money to the United States government. And if I'm offering these investments and I need to incentivize more people, how do I incentivize you? By saying I'm going to give you a higher rate of return.
I'm going to pay you a higher interest rate. Why does that matter? Because if the government is paying a higher interest rate, well now all of a sudden the interest expense for the United States government gets a lot more expensive. Because now the government has to pay higher interest on all of this debt they have accumulated.
Because this $39 trillion is also not a 30-year fixed-rate mortgage. A lot of it is a 1-year loan, 2-year loan, 5-year loan. Which means if interest rates go up, the debt becomes more expensive. And remember, where does the government get their money? Tax dollars from taxpayers. Which means more of your tax dollars could be used now to pay back that interest.
This is that whole life cycle of the debt and bond problem that Jamie Dimon is alluding to. That we have these issues in the United States government. There's one source of revenue, taxes. People are already paying a lot of taxes. The government is spending a whole lot of money. We don't want to cut the spending because if the government cuts spending, well that means somebody gets hurt.
If they cut somebody's social security, we know how that could be painful. If they cut the interest, well that would mean a bankruptcy or default by the government that would create a global economic crisis. If they cut health care, we know how that could be a problem. If they cut Medicare, we know how that could be a problem.
If they cut the defense, well you know how that could be a problem. I don't want to get into the whole war side of business, but the government loves spending money on defense. Not just the United States, but countries around the world love spending money on defense. And this is where now it runs into problems and opportunities.
So, how could it be problems? Well, if we continue to see government spending the way that it is and as of today it looks like we're going to continue seeing an excess of spending versus revenue. Understand that that hurts the value of your savings, that hurts the value of your paycheck because government spending is inflationary, especially if the government is spending money they don't have through money printing.
And we know that the growing lender to the government is the Federal Reserve Bank who has to keep printing money. The other part of that is when the government prints money, inflation happens, the person that gets rich is the investor. Period. Now, I've got to give you the disclosure, okay? Because I'm not a financial advisor, I'm just a random guy on YouTube.
And investing has risks. You are never guaranteed to make money when you invest. In fact, you will lose money at some point. So, make sure you always do your own due diligence and never blindly trust a random guy on YouTube. The idea is if you're concerned about the bond market, you don't want to be holding long-term bonds that are 20 or 30 years maturing in the future because if you're concerned about what's going to happen over the next 10 or 15 years, you don't want to be holding something that you are required to hold for 30 years.
Now, I understand that one of the largest investment classes in the world, if not the largest, is Treasuries, meaning lending money to the United States government. So, if that is something that you're interested in, a short-term Treasury, meaning a short-term loan to the United States government, would be safer than a long-term loan.
And there are a couple ways to do that directly through the stock market instead of actually lending money through something like Treasury Direct. For example, the ETF SGOV, you can buy and sell this on the stock market. This is going to give you exposure to ultra-short Treasuries, meaning loans to the United States government that are generally 3 months or less.
And the idea behind this is you're not trying to see growth in the value of your investment, you're just trying to get regular interest payments. It's a pretty steady interest payment, and you don't have to worry about the long-term United States bond. It's backed by United States Treasuries, and the nice part is when you are investing in bonds, you generally don't have to worry about state or local taxes, but you still have to pay your federal taxes.
Traditional example number two would be something like gold because some people are concerned about the dollar, they're concerned about the value of inflation, that's when generally people turn to gold. Now, the reason I want to talk about gold a little bit longer here is because a lot of people have hyped up the idea of gold because we've seen a huge run-up.
Understand that normally gold prices don't far exceed the stock market for long periods of time unless there is a period of crisis. But gold doesn't always go up. Sometimes it goes down. During the 2008 crash, gold prices soared. When people were worried about the dollar, when people were worried about all the money printing that the government was doing, so gold prices skyrocketed between 2008 to 2012.
Then in 2012 when people realized that the dollar was not going to collapse, gold prices also fell and they stayed down hard until 2020. 2020 the money printer turned back on and then gold prices skyrocketed until today. So, gold is a hedge for people that want to protect themselves against inflation.
Just understand gold doesn't always go up. It goes up when people are concerned about the dollar. There are multiple ways to invest in gold. You can go and buy the physical gold or you can invest in ETFs like GLD which will give you paper exposure to gold. Now, the last thing that I want to say about gold is I don't look at gold as an actual investment.
I look at it as a way of saving money in an alternative form, a way of saving hard money because when you buy gold it doesn't actually produce any value. It just sits there in a drawer looking back at you. When you buy a stock in something like Amazon, that's actually working to produce value because the Amazon company is working to produce a product, is working to produce a profit, and it's working to innovate.
Gold just sits there. Keeping up with the economy is not an easy thing to do. And then when you have all these crazy things happening, it makes it so much more difficult not to get caught up in the political mess and that's why I created Market Briefs. It is a free newsletter for investors that breaks down what's happening in the economy without all the politics and without all the fluff.
It's a quick 5-minute read. We break down what's happening in things like the economy, housing market, stock market, crypto market, and global economy into a fun, witty, and easy-to-read newsletter. It's read by hundreds of thousands of investors every single morning. And as an added bonus, when you sign up for Market Briefs, which is free, you're also going to get my investing masterclass where I walk you through how you can started as an investor and find hidden investment opportunities before they hit the headlines.
I'll show you the exact framework that my firm uses to research investment opportunities. So, if you want to get the investing masterclass and Market Briefs all for free, all you have to do is sign up and I have the link for you down in the description below. [clears throat] The third thing that you can think about, and again, I'm not here to tell you what to invest in, my goal is to show you how you can start thinking like an investor, is to understand where the government is spending money.
Because if the government continues to spend money on things like defense, well, that could create an opportunity. There it is, defense. We know that if there's more geopolitical conflicts, the government's probably going to spend more money on the military, and that could be an investment opportunity for you as well.
Again, I'm not here to be the judge of your moral compass and tell you what's right and what's wrong. I just want you to understand how investors think because my job here is to help spread that financial education. So, if that is something that you wanted to invest in, there are funds that can give you exposure to defense.
For example, ITA is an ETF that gives you exposure to the defense industry. On the topic of government spending, another place where now the government is making a lot of investments and growing investments because of the growing technology, because of the growing competition between the United States and other countries like China, is energy.
Why? Because we need a lot more energy to power our data centers, to power the AI, to power all the technology that we're doing. And we know that we're facing an economic competition between other countries like China to see who's going to be the world leader in AI. So, that could be an opportunity for you as well to invest in the energy space.
There are many ways to play the energy space. I'm just going to go over a couple ETF examples. Again, I'm not telling you what to invest in. I just want you to start thinking like an investor. If you wanted the broad exposure to energy, XLE is an ETF that will give you that broad exposure to energy because we need more energy to fund all this AI and technology.
Or if you wanted to focus in on nuclear because President Trump wants to invest a lot more in nuclear, and UKZ nukes is an ETF that'll give you exposure to the nuclear space. We also know that a lot of the big tech companies are now starting to build their own nuclear facilities. That way they can power their own data centers and their own AI.
Or if you want more broad market exposure, there's a few ways you can go about doing this. If you wanted to invest broadly into the United States stock market, something like spy SPY will give you exposure to the S&P 500. That's the group of the 500 largest companies in the United States stock market.
If you say, "Well, I'm concerned about the United States economy. I want some diversification into other countries as well." There's many ways you can do that as well. For example, VEA is an ETF that will give you exposure to developed countries around the world. These are more of the larger, more established countries and economies globally.
Or if you want to focus in more on smaller countries, more of those nimble, faster growing countries, more risk for more potential return, this could be something like the emerging market countries. And VWO is an ETF that will give you exposure to these emerging market countries. Now, you could get even more niche and invest in specific countries like Japan or China or India or Germany.
There are ETFs that will give you exposure to that. But the idea here is every change creates opportunity. And the part that a lot of people don't understand is pain comes with opportunity. What Jamie Diamond talked about is that there are concerns in the bond market. And a lot of people hear that and they freak out and they panic.
My goal is to help you understand what's happening through education that way you can understand what it means, but also understand how it creates opportunity. Because the situation that we're here in right now is the United States government is spending a lot of money they don't have. They're generating around $5 trillion in in and spending around $7 trillion.
Where are they getting the tax money? Well, they're getting it from your payroll taxes, your FICA taxes, property taxes, capital gains, sales taxes, tariff taxes, corporate taxes, state taxes, local taxes, and any other taxes. Well, they're spending money that they don't have, and their top five expenses are social security, interest expenses, health care, Medicare, defense.
And so, every year they're spending trillions of dollars that they don't have from taxes, which rolls over into our national debt, which at the time of me recording this video was right around $39 trillion. Well, here's the problem. The fastest growing expense for the government is interest expenses because we keep growing our national debt.
But, where is the government continuing to borrow all this money from? They borrow this money from people like you and me and pension funds and investment institutions. They're borrowing this money from foreign countries, and they're borrowing this money from the Federal Reserve Bank. Well, one of the concerns we talked about, which is called dedollarization, is there's many countries around the world that are starting to not lend money to the United States government.
We're seeing a lot of countries say, "You know what? We're going to go from being a buyer of government debt to a seller of government debt." The second concern that we talked about is this part, is private people and institutions potentially turning into sellers of government debt because of the private credit crisis.
There's this whole issue on Wall Street where businesses are borrowing money from these private credit institutions, but they can't pay it back, and the people that were lending money to these private credit institutions are retail investors, pension funds, investment institutions, and a whole lot of other investment groups.
Well, if there's more pain in the private credit market, that could bleed over to people selling these Treasuries. And if people turn into a net seller of Treasuries, that could force interest rates to go up. If interest rates go up, well, now our national debt becomes more expensive. More tax dollars have to be used in interest, and then this the government now has to work to borrow more money, which means more money has to be printed, which creates more of an inflation problem.
That being said, every pain also creates opportunity. Inflation hurts salaries, it hurts savings. This is why you need to understand how inflation works. So, if inflation hurts those things, how can it benefit others? Because inflation also makes investors richer. We've seen this happen not just post pandemic, but for many, many, many decades.
And so, what that means is it could create a whole suite of opportunities. If you enjoyed this clip and you want to continue your financial education journey, I have another video that I think you'll love. All you got to do is click that button right over there. And for those of you who want to stay up-to-date on the top finance and business news, you can join Market Briefs, my free financial newsletter, by clicking that button below. Thank you for watching and I'll see you in the next one.
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