The Kobeissi Letter

Let's pretend the US government was a public company. Typically speaking, investors are happy with a total debt to total asset ratio of ~0.3x to ~0.6x. In other words, investors would like to see total debt levels at most around HALF of total assets. Now, what about the US?

As of February 20th, the US government now has ~$36.2 TRILLION worth of debt. The debt is split into 2 categories. Total debt held by the public, as seen in the balance sheet above, is currently up to ~$28.9 trillion. Intragovernmental debt is currently at ~$7.3 trillion.

Now, if we compute the debt to asset ratio of the US Govt we get a whopping 6.4 TIMES. In other words, the US now has a debt to asset ratio that is more than 10 TIMES as large as an "acceptable" ratio for a public company. Describing this as a crisis is an understatement.

And, it gets even worse. The US government had $2.4 TRILLION of net operating costs in 2024. This is equal to ~43% of the US government's total assets. Since 2020, the US government has averaged a $2.2 trillion annual deficit. That's ~$10.8 trillion in 5 years.

Keep in mind, net operating costs are NET of tax and other revenue received. Take a look at 2023 and 2022 below. In 2023, the US government had total costs of $7.7 trillion but only had revenue of $4.5 trillion. If this were a public company, it would be on bankruptcy watch.

This also explains why Gold is rising and US bond prices are falling. Foreign countries' share of US sovereign debt has reached ~33%, near the lowest in 25 years. This percentage has dropped by ~22 points since the 2008 Financial Crisis. Foreigners are selling US Treasuries.

The historical relationship between US bonds, gold and the US Dollar is BROKEN. Since late-July, gold prices are up ~24% while the US Dollar is up ~2% and the 10-year note yield is up ~8%. This is largely due to markets pricing-in prolonged deficit spending and inflation.

Our premium members have been buying gold for months. We bought the dip into January and called for $2,850+. Once $2,850 was broken, we began calling for $2,950 which was just crossed. Subscribe at the link below to access these alerts: http://thekobeissiletter.com/s...

In FY 2024, the US government saw $7.8 TRILLION in gross costs and just ~$5.0 trillion in revenue. That's $1.56 of cost of every $1.00 of revenue that the US generates. This explains why total US debt is officially up more than $13 trillion since the start of 2020.

And, here's the worst part: The US Treasury "justifies" this massive gap in assets and liabilities with this statement. "The Balance Sheet does not include the financial value of the government’s sovereign powers to tax, regulate commerce, or set monetary policy or value."

This net position is only growing and set to cross $40 trillion for the first time in history in FY 2025. Between 2023 and 2024, the net liability position grew by 6.4%, nearly DOUBLING inflation. The "other" category of liabilities nearly doubles the total US cash balance.

For years, the growing deficit and balance sheet issues were "too distant" to matter. Now, we are finally seeing material effects on markets. Want to see how we are positioned? Subscribe to our premium analysis and alerts at the link below: http://thekobeissiletter.com/s...

Sum this all up and the US now has a public debt net interest to GDP ratio of 4.6%. This is almost DOUBLE the 2nd highest among the world's largest economies. We need a more sustainable solution. Follow us @KobeissiLetter for real time analysis as this develops.