One of the most pressing financial questions facing the United States today is about its outstanding national debt, which recently crossed the $35 trillion mark. That translates into about $270,000 per taxpayer—a figure that many say is downright terrifying. What will happen when this debt “comes home to roost”? How will it all end? These are critical questions, and the answers are far from simple.
Some people subscribe to Modern Monetary Theory (MMT), a macroeconomic theory suggesting that a country issuing its own currency can never run out of money in the same way a business or individual can. Without diving too deeply into this view, it’s important to note that this theory is highly controversial and has more critics than supporters. Just because you can print more money doesn’t mean you will never need to pay it back. At the very least, issuing more dollars could lead to inflation and in a dire scenario, might cause the dollar to lose its global reserve currency status.
While MMT economists advocate for a calm and collected couch-potato approach to this predicament, others take a more extreme stance. Let’s call these preppers “The Three G’s” Squad—those who are hoarding “Gold, Groceries, and Guns” for when the wheels of the U.S. system come off. These folks are preparing for something as drastic as a proper zombie invasion, focusing on stockpiling tangible assets and ensuring self-sufficiency in case of a severe scenario.
While there may be some merit to stockpiling canned food in your basement, we’d prefer a more strategic and less doomsday-oriented approach. This isn’t the first time the U.S. has been in a difficult spot. The great experiment known as the U.S.A., established by the Founding Fathers, has faced its share of challenges before, but it has always pulled through.
So, while you might feel the urge to “do something” and potentially overprepare, our strategy focuses on investing in the largest, most efficient companies in the U.S. These companies are well-equipped to navigate financial crises due to their resources, experience, and operational efficiencies. While the possibility of an extreme event leading to total chaos always exists, it’s more likely that circumstances will create a financial crisis requiring robust and adaptive responses. And who better to manage these challenges than the most capable and resourceful companies?
Consider this: In January 1980, an ounce of gold was trading at $800. Today, that same ounce is worth about $2,400. However, to have merely kept pace with inflation since 1980, gold would need to be priced at $3,200 an ounce. By contrast, $800 invested in the S&P 500 in January 1980, and left to compound (with taxes paid from another source), would be worth about $117,000 today. While noisy preparation might provide comfort now, it has historically come at a steep cost to our long-term serenity.
So, although no one can claim to know how the national debt situation will play out—it’s a complex and daunting issue—what may feel like underpreparing today can be the best preparation. You can choose to take dramatic steps and watch events unfold on TV from your basement (with all the baby corn, of course), but true preparation might actually lie in betting on a brighter future and on those that are best suited to realize it.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
