National Debt Drama Deepens: Where To Stash Your Cash When The Fiscal Sky Falls

Zinger Key Points
  • Foreign assets, gold, bitcoin and real estate are sectors which have been on the rise as voices warn against the rising fiscal deficit.
  • Recent analyses paint a gloomy picture, with most predictions expecting U.S. debt to grow in the coming decade.

U.S. government debt is reaching unsustainable levels, and the latest analysis points to an even more concerning future.

A new economic model developed by Bloomberg Economics predicts that in 88% of scenarios, U.S. debt as a percentage of GDP will rise in the coming 10 years.

In a Monday letter to investors, Citadel founder Ken Griffin referred to mounting national debt as a significant issue, saying that “we must stop borrowing at the expense of future generations.”

According to a recent survey, about 85% of Americans worry that current debt levels could have a negative impact in their future.

Official data from the St. Louis Fed shows that debt equaled 121% of the country’s GDP in the last quarter of 2023. The rate has floated around 120% in past years, after peaking at 132% during the COVID pandemic. These levels are above a previous historical record set following World War II.

In late May 2023, the government averted a default by raising the debt limit even higher in an emergency measure. While lawmakers on both sides of the aisle agree that government borrowing has reached unhealthy levels, a lack of agreement as to how to solve the problem keeps Congress from finding a satisfactory solution.

Earlier this year Fed Chair Jerome Powell said that the current rate of debt acquisition means we're ​​”borrowing from future generations," and called for elected officials to have an adult conversation "about getting the federal government back on a sustainable fiscal path.”

With national debt increasing by an average of $8.5 billion a day during the past year, Republicans generally argue for spending cuts, while Democrats point towards problems in tax revenue and high interest rates as the causes behind the rising fiscal deficit.

A recent budget proposal by President Joe Biden is aimed at reducing the federal deficit by $3 trillion in the next decade by raising taxes on wealthy individuals and corporations.

Where To Find Safe Haven: Bank of America chief strategist Michael Hartnett recently linked a rise in gold and Bitcoin BTC/USD with rising concerns over debt, as investors look for hedges against a possible debt-led crises affecting the U.S. economy.

As opposed to the U.S. dollar, which can be emitted to infinity by printing new cash, both Bitcoin and gold have a cap on their supply, making them safer assets to store value in times of economic volatility.

Also read: Government Debt Exceeds 120% Of GDP: Why Former IMF Economist ‘Very Worried’ About US Fiscal Crisis

SPDR Gold Trust GLD, the largest ETF following the gold market by total assets, has gained over 23% in the last six months. Other gold ETFs, including iShares Gold Trust IAU and Abrdn Physical Gold Shares ETF SGOL follow a similar trajectory.

Bitcoin has hit a slump this week, losing 5% of its value at the time of writing on Tuesday, yet the cryptocurrency has been enjoying a rally in recent months.

When concerns about national debt dominate the news, investors typically seek assets known for retaining value. With the debt ceiling suspension set to last until Jan. 1, 2025, Congress is likely to face another stand-off on debt issues following the presidential election in November, regardless of the winning candidate.


Real estate is another sector known to serve as a store of value, and investors can take part without the need to buy actual land. ETFs following the sector reflect its growth trends, with some of the largest being Vanguard Real Estate Index Fund ETF VNQ and Schwab US REIT ETF SCHH.

ETFs following companies in Europe, Asia, Australia and other developed territories, also known as foreign asset ETFs, can also serve as a safe haven from U.S. volatility. Some of the largest include Vanguard Tax Managed Fund FTSE Developed Markets ETF VEA as well as iShares Core MSCI EAFE ETF IEFA.

The new report by Bloomberg Economics executed one million simulations tinkering with several variables in order to encompass the widest possible range of future scenarios. In 88% of the scenarios, the debt ratio went up between now and 2034, making the path of U.S. government debt unsustainable.

Bloomberg's team started its analysis by setting off from projections published by the Congressional Budget Office, which warned earlier this year that the fiscal deficit is spinning out of control, even when assuming that inflation will stabilize at 2% and the Fed will drop interest rates.

The firm used a computational analysis which created a model using "market pricing for future interest rates and data on the maturity profile of bonds," and its results surpassed Congress' predictions, taking U.S. debt into new records over the coming decade.

Now read: Elon Musk Calls For ‘Strong-Willed President’ After GOP Rep Warns ‘Economic Catastrophe Must Happen’ Before Congress Gets Serious About ‘Out-Of-Control Spending’

Photo: Shutterstock

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