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To investors,

The national debt continues to be a topic of discussion for finance leaders around the world. Whether the conversation is happening at Davos or at The Future Investment Initiative Institute, there is a growing concern that the debt has become unsustainable.

I spent last night digging into the current state of the national debt and here is what I found.

First, we have officially crossed over $34 trillion.

That is a big number. We are now adding more than $100 billion per month to the already outrageous situation. According to the US government, “over the past 100 years, the U.S. federal debt has increased from $403 billion in 1923 to $33.17 trillion in 2023.”

That chart is wild to see, but it doesn’t even include the almost $1 trillion of additional debt since the end of Q3 last year.

Another way to look at the debt is as a percentage of GDP. We can see that the country was able to swing this ratio in a positive direction for much of the 1960s and 1970s, but since the 1980s we have been headed in the wrong direction. Today the debt-to-GDP stands at more than 120%.

The issue here is not just how big the debt is, but also how expensive it is to hold this debt. The US government is now paying more than $1 trillion per year in interest payments.

This number has gone parabolic in the last four years. With interest rates remaining high, there is no relief in sight either. The higher this interest payment, the worse off Americans are.

The Peter G. Peterson Foundation writes “higher interest costs could crowd out important public investments that can fuel economic growth — priority areas like education, R&D, and infrastructure. A nation saddled with debt will have less to invest in its own future.”

The organization also highlights the fact that the government is predicting things are only going to get worse in the next decade or so — “The Congressional Budget Office (CBO) projects that the U.S. government will run trillion-dollar deficits over the next 10 years, resulting in a cumulative deficit of $20.3 trillion between 2024 and 2033.”

This is the new normal.

A highly indebted society that will have to borrow more money in the future to fund the payments of the existing debt. Add in the fact that the US needs more debt to fund the multiple proxy wars overseas, to address the crisis at the southern border, and to fulfill the increasing demands from the various entitlement programs that have been promised to aging Americans.

These facts guarantee two things — the government will continue to seek new ways to increase taxes on its citizens and the government will debase the currency over the long run to monetize the debt.

Both of these are negative things in my opinion. But they may as well be written in stone at this point. The government has no other choice.

As investors, we must spend time thinking critically about how to allocate capital to benefit from these trends. It will likely be the difference between driving attractive performance or not. There will be various stocks to buy or store of value assets like bitcoin, but there will also be tons of private market opportunities like senior citizen living centers that are paid by the entitlement programs.

The world is changing. Stay on top of the facts so you can predict where value will accrue. Evolve or die.

Hope you all have a great start to your week. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Today’s episode is a joint podcast with the team at Reflexivity Research and the team at Elementus. From Reflexivity, we have Will Clemente (Founder). From Elementus we have, Max Galka (Founder & CEO) and Alex Mologoko (Head of Research). 

This conversation covers a brand new massive report covering year-in-review of 2023 of everything that happened on-chain. Topics include bitcoin rally, open interest, wallet activity, inscriptions, stablecoins, and more.

Listen on iTunes: Click here

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On-Chain Year In Review for 2023

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