U.S. Government Debt At $26 Trillion – Implications

The government debt in the United States has continued to increase in the last few decades.

As of September 2020, U.S. government debt was at $26 trillion.

Debt as a percentage of GDP has surged to 136%.

As the chart below shows, U.S. government debt has sharply increased in the recent past.

Government Debt United States

I believe that as government debt continues to surge, assets like gold, silver and cryptocurrency will trend higher.

The reason is as follows –

In the modern banking system, debt is money.

As government debt swells, the liquidity in the economic system also increases. At the same time, government debt will continue to increase in the coming decade according to U.S. CBO projections.

If interest rates also trend higher, there will be a time when debt will be needed to service existing debt. This is inflationary and will result in a decline in the dollar.

At the same time, this will imply that assets like gold, silver and cryptocurrencies surge.

As inflation increases, the purchasing power of the dollar will decline. Investors will look for diversification of investments to beat inflation. This would imply higher money flow into hard assets like gold and silver.

Bitcoin is also gaining wider acceptance and I would not be surprised if the cryptocurrency surges past $20,000 in the coming year.

Overall, there are indication of high to very high inflation in the coming years. Investors need to diversify their portfolio and remain invested in honest currencies.

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I am a financial analyst with interest in global financial markets and macro economy. I write for various publications providing short-term and long-term investment ideas among different asset classes.

Portfolio Diversification Strategy
Portfolio Diversification Strategy

For every investor, its important to have diversified portfolio strategy. One of the most important reasons to go for portfolio diversification is to reduce the risk. Another critical reason to pursue portfolio diversification is to generate returns from different asset classes that beat the rate of inflation. This will ensure that purchasing power is preserved for an individual. At the same time, when a portfolio has risky assets like equities or commodity, it ensures that returns can be maximized.

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