This is an opinion piece by Mickey Koss, a West Point graduate with a degree in economics. He spent four years in the infantry before moving to the Finance Corps.

i love to listen Greg Foss on podcasts, especially when I’m preparing for a heavy deadlift or something. His no-nonsense link talks really get my blood pumping and my mind focused. But when I send stuff like that to my less financially conscious buddies, they often have a hard time understanding what he’s talking about.

Here is my attempt at potentially oversimplified math to explain the spiral of debt.

“What is the National Debt” from US Treasury

US federal debt

As of October 13, 2022, the United States had $31,144,952,729,330.20 in debt outstanding. This is updated daily by the Treasury. To make the math a little easier, let’s call it $30 trillion. After all, what’s another trillion, more or less?

When the United States has large debt, high interest rates, and a budget deficit, there is no hope of ever paying it off.

Average Treasury Interest Rates as of September 30, 2022

This implies an annual interest payment of $621 billion on the debt this year. The Washington Post estimated at $580 billion. Let’s split the difference and call it $600 billion.

If you’ve been paying attention, the Federal Reserve is aggressively raising interest rates and the market is just as aggressive in its bids for yield on government debt. Each basis point added to the average US government debt rate will add about $3 trillion. in additional interest charges. That is if the debt remains at its current level.

Unfortunately, that won’t happen. Currently the year budget deficit sits at $946 billion a year with no sign of ever falling to zero. Since this is the case, not only will the US government have to issue more debt at a rate of nearly $1 trillion more per year, but it will do so while interest rates are rising rapidly.

The higher interest rates rise, the more interest on the debt will have to be paid. The higher the interest on the debt to be paid, the more the deficit increases. The higher the deficit, the more debt must be issued. More debt issued, more interest on debt. Even if the Fed cut rates to zero, debt would continue to grow at a compound rate due to the nature of the deficit.

When the United States has large debt, high interest rates, and a budget deficit, there is no hope of ever paying it off.

“What is the National Debt” from US Treasury

Even more concerning is the chart above depicting debt as a percentage of gross domestic product. The upward slope of the line since the mid-1980s implies that debt has been growing faster than the economy for decades.

The nature of the perpetual budget deficit ensures that this situation is unavoidable; the Fed is just accelerating it right now. Debt begets more debt as long as the deficit exists.

Hope you get it now. This is what Greg Foss means by spiraling debt. The debt is never repaid; it keeps reversing, growing at a compound rate. On this trajectory, it will begin to accelerate.

bitcoin is protection

Based on the math alone, the Federal Reserve can’t keep raising rates any longer, or keep them that high, because the interest on the debt will spiral out of control. There’s a lot to be said for a Fed pivot and when they decide to gradually cut their interest rate to bring interest rates down. When will they actually do it? I’m not sure, but the Fed will eventually have to cut rates to try to slow the bleeding. And when it does, the rally that bitcoin price will have will melt your heart.

Although I’m not particularly interested in the price anymore – unlike some – I am concerned that ordinary people may jump on the bitcoin life raft before it flies off into space.

Absolute scarcity is an absolute imperative in a world devoid of monetary scarcity. Be a good friend: Help people grasp this concept, because most don’t understand what’s coming.

This is a guest post by Mickey Koss. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.