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as of January 8th 2024 the national debt in the United States has surged past an alarming $34 trillion for many that huge number might seem distant almost inconceivable without context however digging into this seemingly enormous figure unravels a profound and upcoming danger this massive number not only signifies a financial burden but also casts a shadow over the destiny of our nation and the legacies of generations to come in today's video we explore the alarming observations of Ray Dalo a seasoned Financial expert who for over 3 years has been sounding the alarm on the critical dangers lurking within the corridors of government dangers that have specific consequences and look to threaten the entire Financial ecosystem everything from stocks to real estate faces the serious threat when looked at through the prism of Doo's warnings signs that have roots in a problem that started in the early 80s and are only now starting to show symptoms of trouble do you understand just how s ve this problem is we first need to dive into a bit of History Deb has always been a companion of the United States since its Inception this enduring presence has led many to perceive it as a familiar and perhaps harmless aspect of our national landscape now without boring you to death I'm going to avoid going through the full history up until this point today but what you have to understand is the key takeaway that has always been woven into the fabric of this country's narrative so naturally you might wonder why War now after all we've grappled with this challenge throughout our history and have always found the way forward however this is where we dwell into the concept of death Spirals and how they've consistently played a role in the downfall of some of history's most significant and prosperous Empires and right now we seem to be headed in that exact Direction You may call it farfetched but the signs are definitely there you see over time as our debt exponentially expands we as a nation will eventually reach a point where the amount necessary to serve as that debt becomes too large what I mean by this is simple it's very easy to borrow money at favorable rates and good terms but once the going gets rough and the interest rates increase the burden becomes exponentially harder to pay and we are a lot closer to that than what you probably think right now the United States spends $169 billion per year on interest expenses alone which makes up around 16% of our annual budget it's estimated that in four years the government will spend two times more money on interest than it will on our entire military this path forward is clearly unstable and poses a serious risk to our entire Financial system to understand the specifics and just how bad it will get don't listen to me listen to Dalo he makes it very clear just how close we are to this dangerous scenario are we in a debt crisis or are we headed for one um we are at the in my opinion we are at the beginning of a very classic late cycle late big cycle debt crisis when the supply demand Gap when you're producing too too much debt and you have also a shortage of buyers what's happening now as we have to sell all this uh debt is we then have do have enough buyers there are changes now in terms of the quantities in the world that are being held by um large investors around the world that have lost money in these treasury BS bonds and so on and then there are geopolitical changes which are having an effect some cases some countries are worried about sanctions and then there's this geopolitical shift so when I look at the supply demand issue there's a supply demand issue for that debt there's a lot of debt it has to be bought has to have a high enough interest rate so a crisis that's you know if we continue down this path in terms of what what's likely over the the next you know five and 10 years then you what you reach the point that that Balancing Act becomes very difficult how will we know and is it really a function of not having enough buyers for the federal debt is there any evidence of that so far um we we're right at the brink of starting to find out that the amount of selling of government debt um collapsed right we didn't issue government debt um and now we're going to issue a lot of government debt and so when one looks at when we look at the buyers there appears to be a shortage a significant shortage of the buyers for that government debt but we're now at the brink of being able to see what that Supply demand P um picture looks like as we go over the next year and two so you just heard Dalo there explain that the government sells its debt and what he means by this is simple when the government needs funds to cover its expenses such as infrastructure projects or public programs it often turns to the financial markets to borrow money the mechanism it uses for this is selling government debt in the form of Treasury Securities these treasury Securities are essentially promises to repay a certain amount of money with interest over a specified period the government issues different types such as treasury bills notes and bonds each with varying maturity dates investors ranging from individuals to large financial institutions and foreign governments purchase these Securities when these individuals or entities Buy treasury Securities they are lending money to the government in return they earn interest on their investment this process is how the government raises Capital to finance its operations without relying solely on taxation now obviously the problem Doo is talking about is that there is less and less demand for US debt instruments now if there is less demand for these IUS it means fewer people and investers are willing to lend money to the US government and of course this is a big deal when there's less than demand for US debt it can lead to a few challenges first the government might have to offer higher interest rates to attract lenders because like any product if fewer people want it you might need to sweeten the deal secondly if the demand for US debt keeps dropping it might become harder for the government to raise the money it needs imagine if you needed a loan and fewer and fewer Banks were willing to lend to you it could make things more challenging financially now let's tie it all together as the federal government deficit grows significantly the government is compelled to issue more debt instruments to bridge the gap between the taxes it collects and its annual spending however rayo's observation reveals a concerning Trend the diminishing demand for these debt instruments when demand for these instruments drops it triggers a critical Consequence the interest rates on these Securities must rise considering that we are already allocating a substantial amount of funds to cover interest expenses any further increase poses a serious threat to our economic stability elevating interest rates on government instruments tends to have a ripple effect influencing interest rates across the board if taken to an extreme this situation can hinder economic growth potentially leading to a recession in essence the intricate interplay between a soaring Federal deficit declining demand for debt instruments and the necessity to raise interest rates on these instruments can create a delicate economic balance striking that balance is crucial to prevent adverse repercussions on the broader economy now if we go down that road and things get ugly what you tend to have are problems that are much worse than just plain Financial take a listen to Doo's explanation given the challenges that we Face uh fiscal challenges that you describe uh we need appal process that'll help us get out of it do we have that as goes to the second issue that you always deal with which is internal conflict well the the things that you see happen over and over again when you look at history is when you have a financial not good situation at the same time as you have large wealth gaps you start to see the emergence of populism and we see extremism in both of the political parties okay we see that split a populist is an individual or leader or a political person who will win at all cost that the rules of the game don't as much matter and so we're in a a the the January 6th type of incident and so on is very interesting the political system in terms of primaries and and the parties tends to create that sort of polarity I think that um I think it's very clear that there is only one good outcome if we can and that's a strong bipartisan middle because either of the extremes is not going to be able to be dominant you're um the small right this um or or even the small left and um and as a result we're seeing a fragmentation geographically you're seeing people move to different areas not just because of taxes but of differences in values and so on um and so you're seeing this separation I think over the next um two years um the real question is can we maintain can we have a strong bipartisan middle or are we going to have that kind of fragmentation be we have two thing three things aligning that are concerning uh on this uh short-term debt cycle I call it you know the seven-year cycle we're about halfway through in other words interest rates are now at a level that they're probably going to stay up but they're probably not going to rise much from here and there's tightness and the consequences of that are going to be a weaker economy going forward doesn't have to be a big big downturn because of the household sector but it is a balance sheet kind of um recession and I think you're going to that's things are going to get worse in the economy there's a financial issue at the same time as you have this internal conflict so I think that that's going to make for um a risky situation now as horrible as that sounded it's not all bad news in the face of growing concerns about the current trajectory of US national debt some parts of History provide us with a reassuring perspective considered the aftermath of the Civil War when the national debt skyrocketed by a staggering 40x during that turbulent period the United States faced unprecedented challenges and its Global position was much less significant than it is today despite the enormity of the thatb the US successfully navigated through that turbulent time Bond sales prudent fiscal policies the commitment to redeeming currency and economic growth play pivotal roles in maintaining stability fast forward to the president and while our national debt is rising exponentially the US is far better equipped to manage the situation in the modern era the country has a more established Global standing and a diverse economy even if the debt were to Surge dramatically historical lessons suggest that careful financial management coupled with measures such as Bond issuance and responsible fiscal policies can help prevent hyperinflation importantly as the global Reserve currency and a military superpower the US possesses unique advantages including the ability to export inflation these strengths coupled with resilience make hyperinflation difficult to imagine in the coming years the unique position of United States in international trade is driven by the widespread use of the US dollar due to the high demand for US Dollars globally the country can maintain a situation where it Imports more than it exports without experiencing a significant depreciation of its currency this advantageous position allows the US to increase the supply of dollars for various purposes such as funding social programs defense spending covering interest expenses and even providing bailouts to Banks all without causing a drastic decline in the value of the dollar compared to other currencies according to a 2022 survey by the bank for international settlements the US dollar is involved in approximately 88% of global foreign exchange transactions this percentage has remained relatively stable over the past two decades this data underscores the flexibility the US has in managing budget deficit even in challenging situations there's a considerable buffer as many countries would be affected before the US faces severe consequences while this approach might raise ethical questions it reflects the US government's preference for having the rest of the world bear the brunt of economic challenges before reaching a point of hyperinflation so while yes there are points to Doo's argument there are also those who believe them to be far-fetched and unrealistic wherever you stand on the issue it's cleared as some sort of reform is needed as government spending has simply spiraled out of control and part of the reason it has is because there haven't been any major pain points that have resulted from it in recent years all new rules are Written in Blood so it may be that a major economic Fallout is what's needed to kick lawmakers into a different mindset and change the trajectory of the country let me know what you think in the comments below and as always please make sure you hit that like And subscribe button if you enjoyed the video and a last minute plug here a quick reminder if you're considering a new credit card check out the enticing offers from Chase by clicking the link below in the description it would mean a lot if you use my referral links below as always thank you for watching
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