The Investment Scientist

America’s national debt is spiraling out of control. It’s at $34.4T right now and is increasing at a rate of $2T per year. Today I am going to prognosticate what will likely happen and what it will mean for us investors.

To make the projection, I will  assume things will stay largely as they are:

1. Inflation around 4%
2. Interest rate about 5%
3. Budge deficit around at $2T

At this rate, in five years, the total federal debt will be over $44T. At an average interest rate of 5%, the total interest payments in the federal budget will be $2.2T. In 2023, the total federal tax revenue came at only $4.6T. In other words, in five years or so, the interest payments alone will amount to nearly half of the federal tax revenue. 

With a budgetary shortfall at that level, there will be no other option but to “print’ more dollars. Today I will not discuss the mechanism of printing money. Suffice to say that printing money will lead to inflation and inflation necessitates that the Fed keeps the Fed fund rate high.