| Last week I wrote about how gold was going to trade in a range for a while longer, and stressed why we shouldn’t be concerned about the health of this bull market.
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| The reason? Because the underlying factors that are supporting this bull run are decades in the making and will not be derailed.
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| I made some of these same points in a fascinating interview with the great Mike Maharrey of Money Metals. That podcast episode features many important points that I don’t believe you’ll find anywhere else.
That interview was just released, and you can watch it here.
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| In talking with Mike, we both marveled at how much we agreed on...and how the decades of ever-easier money and ever-greater debt virtually assured much higher gold prices over the years ahead.
Then, lo and behold, Mike put out a commentary on the Money Metals site today that put a spotlight on how the debt problem has just gotten even more ominous.
I decided I couldn’t say it any better than Mike, so I’m reprinting his commentary below...and urge you to visit Money Metals for more outstanding analyses like these.
— BL
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| U.S. Government Debt Black Hole Got Bigger in February
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| I could almost put this story on a monthly repeat.
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| The federal government ran another big budget deficit in February, as the national debt nudges close to $39 trillion.
According to the Monthly Treasury Statement, the Trump administration spent $307.5 billion more than it took in last month. This was almost identical to the February 2025 deficit, despite an increase in revenue.
The February shortfall drove the fiscal 2026 budget deficit to over $1 trillion in just five months.
For context, the biggest deficit run by the Obama administration was $1.41 trillion in 2009.
The relentless monthly budget deficits keep pushing the national debt higher. After eclipsing $38 trillion in October, it has ballooned to $38.9 trillion today.
The good news is the 2026 deficit is down about 12 percent from the same period last year, thanks to a big boost in revenue, primarily generated by tariffs.
The bad news is that federal spending is still out of control.
Uncle Sam took in $313.12 billion last month. That was up 5.6 percent from February ’25.
Through the first five months of fiscal 2026, the federal government has collected $1.89 trillion, 10.8 percent more than the same period in fiscal 2025.
So far in fiscal 2026, the federal government has collected $151 billion in customs duties. That’s up about 294 percent from a year earlier.
That gravy train may be coming to the end of the tracks. After averaging around $30 billion per month at the peak, tariff collection dipped to $26.6 billion in February.
It remains unclear how the recent Supreme Court opinion declaring Trump’s unilateral tariffs unconstitutional will impact collections – but it probably won’t be positive.
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| Houston: We Have a Spending Problem!
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| Meanwhile, the Trump administration continues to spend money hand over fist.
The government blew through another $620.62 billion last month. That was up 2.8 percent over the same period last year.
In total, Uncle Sam has spent $3.1 trillion through the first five months of fiscal 2026. That’s up about 2 percent over the same period in fiscal ‘25.
A 2 percent increase in spending might not sound significant. But weren’t we told there would be spending cuts?
In fact, there were some cuts.
The increased spending comes despite cuts to the EPA and the Department of Education budget that are now showing up in the data. Lower disaster spending also helped moderate spending levels through the first two months of fiscal ’26.
Looking at the big picture, the spending trajectory is up. Even with all the hype about DOGE and some lip service to cutting spending during the early days of the Trump administration, the U.S. government spent just over $7 trillion last year. That’s an average of $583.3 billion per month or $19.2 billion per day.
And now there’s a war.
Despite some non-specific talk about “spending cuts,” there seems to be little to no commitment to dealing with the runaway spending substantially.
The Big Beautiful Bill trimmed some spending but increased it in other areas. Furthermore, those “cuts” were from projected spending increases. Actual expenditures will still go up, just not as fast as originally planned. The bottom line is that even with the Big Beautiful Bill, spending will increase on an absolute basis. We’re seeing it now.
And all that waste uncovered by DOGE? Virtually none of it was removed from the budget.
This is par for the course. It’s a lot easier to talk about spending cuts than it is to actually cut spending.
You might recall that President Biden promised that the [pretend] spending cuts would save “hundreds of billions” with the debt ceiling deal (aka the [misnamed] Fiscal Responsibility Act).
That never happened.
Supporters of the Big Beautiful Bill expect economic growth stimulated by tax cuts to boost revenue and narrow the deficit. However, history casts significant doubt on this claim.
The ugly truth is the government isn’t committed to cutting spending in any meaningful way, and it always finds new reasons to spend even more, whether for “crises” at home or wars overseas.
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| Uncle Sam must pay interest on the nearly $39 trillion debt. Interest expense has grown into the second-largest spending category in the federal budget behind only Social Security.
In February, the Treasury forked out $93.48 billion on interest expense alone. That pushed interest expense to $520 billion through the first five months of fiscal 2026. That was up 8.8 percent compared to the same period in fiscal ’25.
Interest on the national debt cost $1.2 trillion in fiscal 2025. That was up 7.3 percent over 2024.
Net interest (interest expense – interest receipts) was $79 billion in February.
Through the first five months of the fiscal year, the federal government spent more on interest on the debt than it did on national defense ($412 billion) or Medicare ($478 billion). The only higher spending category is Social Security ($678 billion).
Much of the debt currently on the books was financed at very low rates before the Federal Reserve started its hiking cycle. Every month, some of that super-low-yielding paper matures and must be replaced by bonds yielding much higher rates. And even after the Federal Reserve cut rates, Treasury yields have pushed upward as demand for U.S. debt sags.
When people say the spending is unsustainable, it feels like an understatement. However, very few people in the political class seem the least bit interested in tackling the problem. The bad news is that at some point, the problem is going to tackle them.
Originally Published on Money Metals.
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