Day after day decisions pile up. Some good. Some bad. Good decisions generally bring wealth, prosperity, satisfaction, and freedom. Bad decisions generally bring poverty, failure, discord, and captivity.
The U.S. national debt has now exceeded $39 trillion. That number is so large, and is growing so fast, that it’s nearly incomprehensible. Nonetheless, it will have a very real and direct impact on your savings and retirement. What’s more, your kids and grandkids will rue it.
Over many decades, Washington has been completely devoid of fiscal responsibility. Reckless spending has stolen the future from younger Americans. They will get to keep less of what they earn. In return, they will get less for the tax dollars they pay.
Moreover, because a greater percentage of their incomes will go to service the interest on past debts, instead of capital investment, they will be trapped in a slow growth or stagnating economy. As a result, younger Americans will have to make their way in an economy with fewer opportunities.
By now, government debt has grown so large that just paying the interest consumes a significant portion of the federal budget. According to the Congressional Budget Office (CBO), interest payments will total over $1 trillion in fiscal year 2026. But that’s nothing.
Within the next ten years, interest payments will rise to $2.1 trillion. This is because Washington’s completely incapable of getting a grip on spending. Balancing the budget, let alone paying down the debt, has long since disappeared from Congressional discourse.
In fiscal year 2025, the government ran a $1.78 trillion deficit, spending $7.01 trillion while only bringing in $5.23 trillion in revenue. Interest payments accounted for over half of the deficit. For 2026, the CBO is projecting a deficit of $1.9 trillion. Each year these deficits are racked and stacked on top of the national debt – driving the current $39 trillion debt to the moon.
Borrowing for Bombs
However, the CBO projection is likely too low. When it’s all tallied up, the deficit in fiscal year 2026 will be well over $2 trillion. The ongoing bombing of Iran is pouring a bucket of gasoline on the fiscal forest fire.
War is the ultimate act of capital destruction. In addition to blowing up buildings and infrastructure, it also blows up deficit spending. Washington is paying for missiles and bombs with borrowed money at interest rates that are significantly higher than they were five years ago. The interest on these missiles and bombs will be paid by unborn Americans over 100 years from now. But that’s assuming there are enough jobs to support gainful employment.
If you’ve reviewed the 2025 benchmark revisions from the Bureau of Labor Statistics, you know exactly what we’re talking about. Calling the monthly revisions a disgraceful joke is perhaps the understatement of the decade. It wasn’t just a clerical error. It was a systematic hallucination.
The official 2025 story, the one used to justify interest rates and strong economy rhetoric, was that we added 584,000 jobs. It was the storyline that fueled a thousand triumphant headlines and emboldened the Fed to ignore the cries for relief from the housing market. Yet it was all a crock of hogwash.
The BLS recently took a giant, institutional eraser to 403,000 of those jobs. After finally reconciling their projections and models with actual unemployment insurance tax records, the hard data that doesn’t lie, the real number for 2025 was revealed to be a pathetic 181,000.
Let that sink in. That comes to roughly 15,000 jobs per month for the entire nation. In an economy of our size, 15,000 jobs is essentially a rounding error. It’s statistical stagnation. Moreover, it amounts to a staggering 69 percent reduction from the original reports.
But wait, it gets worse. According to BLS, total nonfarm payroll employment fell by 92,000 in February 2026. Jobs are disappearing faster than Iranian leaders.
Yet the monetary picture looks just as grotesque as the fiscal and employment pictures…
Liquidity Trap
The Federal Open Market Committee (FOMC) met this week. With the new realities of the labor market courtesy of the BLS revisions, it was anticipated that the Fed would cut interest rates. But that was before Iran closed the Strait of Hormuz and the price of oil spiked to $100 per barrel.
The combination of higher gas prices with already elevated consumer prices – increasing at an annual rate of 2.8 percent – left the Fed with little room to maneuver. Thus, it maintained the federal funds rate within its target range of 3.5 to 3.75 percent.
This decision to hold rates steady was probably a mistake. The fact is, interest rates will have to go much higher over the next decade to keep inflation in check. High rates, in turn, will make the interest on the $39 trillion debt even more expensive.
At the same time, because the U.S. weaponized its financial system through sanctions following the Russian invasion of Ukraine, many nations are easing up on their dollar reserves. As global demand for Treasuries drops, the Treasury has to offer even higher interest rates to entice buyers, further deepening the debt interest spiral.
Yet, since the bombs started dropping on Iran the dollar has curiously grown stronger, both on the foreign exchange market and relative to gold and silver. What gives?
Were gold and silver overbought following last year’s runup? Were they due for a significant price correction?
Perhaps. But normally, when missiles fly the geopolitical uncertainty pushes gold and silver higher. Right now, however, we’re seeing capital running towards the dollar. The last we checked, the dollar index was back over 100.
While gold is a store of value, the dollar is the world’s liquidity. When the war in Iran escalated, investors preferred being liquid to being safe.
What to make of it…
Why Gold Is Dipping While the Market Panics for Cash
Gold and silver aren’t falling relative to dollars because people no longer want them. They’re falling because people need cash. As stock markets panicked, big institutional players faced margin calls. To cover those losses, they sold their winners, which, after a massive 2025 rally, were gold and silver.
At the same time, the private credit market (i.e., non-bank lending to mid-sized companies) is facing its first real stress test. Come to find out, many of these loans use payment-in-kind (PIK) structures. This allows companies to pay interest with more debt rather than cash. With the prospect of rates staying high due to war-driven inflation, these debt piles are becoming unmanageable.
Consequently, there’s been a surge in investors trying to pull their money out of private credit funds (redemptions hit over $10 billion recently). Since these loans aren’t easily sold, the redemptions are limited. Investors want out, but the cash is locked in long-term loans.
The irony is that the more the private credit market wobbles, the more people scramble for the perceived safety of dollar. Thus, creating a feedback loop that keeps gold and silver under pressure for now.
Still, we aren’t counting gold and silver out just yet. In fact, all the fundamentals that have propelled this bull market are still in place. If anything, the war in Iran has made the fundamentals for gold and silver stronger.
Short term market volatility and chaos will continue. But long term, as the government does everything it can to inflate away the debt, gold and silver will prevail as the best, and truest form of money. The dollar, on the other hand, will return to its intrinsic value – somewhere between toilet paper and birdcage liner.
Stay liquid, stay diversified, and hold on to your gold.
[Editor’s note: Get a free copy of an important special report called, “Cash Machine – Why You Should Own this Mineral Royalty with a 12% Yield,” when you join the Economic Prism mailing list today. If you want a special trial deal to check out MN Gordon’s Wealth Prism Letter, you can grab that here.]
Sincerely,
MN Gordon
for Economic Prism
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