When a Treasury Secretary Sounds the Alarm, We Should Pay Attention
Peter Reagan

Former Treasury Secretary Robert Rubin says today’s debt trajectory echoes past periods of financial strain. Treasury data backs him up. Here’s why rising interest costs and structural deficits matter more than any headline… 

There’s an old line that those who don’t learn from history are doomed to repeat it. Personally, I’ve always thought there’s a quieter truth sitting beneath it:

Those who do study history often end up living with the consequences of decisions made by people who never bothered.

That dynamic shows up everywhere in economic life – in how nations borrow, how they spend, and how policymakers convince themselves that long-term discipline can wait until next year. None of us gets to choose the monetary environment we’re born into. We simply inherit it.

But while we can’t control the hand we’re dealt, we can decide how to navigate it. And unlike a card game, the choices available to savers aren’t limited to luck.

Before we get to those choices, though, it’s worth looking at what prompted this week’s discussion in the first place.

Why the former Treasury Secretary is raising red flags

When someone like Robert Rubin raises his hand, I tend to slow down and listen. Rubin served as Treasury Secretary during a period when Washington still pretended to care about fiscal discipline. So when he said that the real threat to our economy isn’t AI exuberance or the latest financial fad – it’s federal debt – he wasn’t being dramatic. He was stating the obvious, out loud, at a moment when few in power want to.

Rubin pointed to Congressional Budget Office projections showing debt already near the size of the entire U.S. economy – and rising steadily from here. But he went further, suggesting the official forecasts are optimistic. Work from Yale’s Budget Lab, he noted, points to a debt‑to‑GDP ratio of 130–140% in the coming decade.

If you’re like me, you don’t need a graduate‑level economics discussion to know that when a nation owes far more than it produces, the math becomes unforgiving. Debt doesn’t just sit there quietly – it compounds. And when it begins to compound faster than income, policy, or political will can keep up, something eventually gives. (There's a reason my colleague Phillip Patrick warned us that excessive debt is the greatest risk.)

That’s the part Rubin didn’t spell out explicitly. But history has.

Why today’s debt burden is more dangerous than ever

People often compare today’s environment to 1987 or to 1929. There are parallels, to be sure, but those crises occurred in a world far less interconnected than the one we live in today.

Forty years ago, the economy was more compartmentalized. In past downturns, a failure in a single sector might spill into a handful of others. Only a truly spectacular event caused contagion that spread panic to the broad economy.

Today, though, nearly every corner of our financial system is tied together. Credit markets, pensions, government spending, employment, global supply chains, consumer sentiment and multinational corporations – they're all tied at the hip. Tug one thread hard enough and the whole pattern shifts.

And the biggest thread of all, running through all those sectors I just listed, is federal government debt.

The Treasury Department's October report shows that the government spent $91 billion on interest payments in a single month. That’s 13% of all federal spending in October. Think of it as $1 in every $7 going not to defense, infrastructure, or seniors – but simply to roll over old debts. We're still refinancing spending Congress passed as far back as 1995. 

Worse, in that same month, Washington borrowed 41 cents of every dollar it spent. Which means – and there’s no polite way to say this – the government had to borrow the money to pay the interest on the money it already borrowed.

There’s a name for that dynamic when it happens to households: Insolvency.

Nations don’t “go bankrupt” in the same way people do. They do something quieter, and in many ways more damaging: They let their currency absorb the pressure. Prices rise. Savings weaken. Confidence erodes. Ordinary families feel squeezed long before official statistics acknowledge it.

I don’t raise this to be dramatic. I raise it because the data is telling the story clearly.

When federal debt rises, households pay the price

When interest becomes one of the largest categories of federal spending, every other priority gets pushed to the margins. That includes programs millions of Americans rely on. Even for those who aren’t dependent on federal assistance, rising deficits show up in familiar places – grocery bills, medical costs, insurance premiums, and the general feeling that your paycheck doesn’t stretch as far as it used to.

It’s not Weimar Germany or Zimbabwe – and we should avoid sensational comparisons – but history does offer a useful lesson: when governments lose control over spending, inflation becomes the path of least resistance.

In Germany’s case, printing money to meet obligations after World War I triggered a currency collapse that turned everyday life absurd. Britannica recalls one example: a student ordered a cup of coffee for 5,000 marks; by the time he finished it, the next cup cost 7,000.

Thank goodness our situation is nowhere near that extreme. But I have a point in recounding that story: The underlying mechanism – governments overspending, interest costs accelerating, policymakers searching for painless options – is identical.

And you don’t need numbers in the trillions to feel the pressure. You only need a steady decline in purchasing power.

We can’t control the hand we’re dealt – but we can choose how to play it

Washington may continue down this path for years. Debt is politically easy. Restraint is not. No one in Congress wins points for warning that interest payments are crowding out national priorities.

But individual Americans still have choices.

Some of the most respected financial thinkers of our time – investors with wildly different philosophies – have reached a similar conclusion: In an time of rising debt and declining currencies, it’s prudent to hold assets that don’t rely on government promises.

Physical precious metals fall into that category.

Gold doesn’t depend on Congress passing the right bill or the Federal Reserve making the perfect policy call. It isn’t a claim on someone else’s debt. It’s an asset with no counterparty – something that tends to hold purchasing power even when the financial system is going through one of its periodic reinventions.

If you’re interested in learning how more Americans are using physical gold as a long‑term hedge against fiscal uncertainty, you can explore the options – including tax‑advantaged ways to hold metals — in our free information kit.

That kit won’t change Washington’s choices. But it may help you make your own with a clearer sense of history, risk, and the practical steps available to everyday savers.

 

 

Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.

 

 

 

www.birchold.com