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How can we follow the instructions in the Sermon on the Mount and not be anxious during these economic times? Our National debt is out of control, and other indicators reveal that we are in a precarious financial position as a nation in several respects. Our unfunded commitments increase our actual debt to about $100 trillion.

Deficit Spending

We will spend more on interest expense by fiscal year 2028 than we spend on national defense. The Federal Reserve System owns $6.2 trillion of our national debt. China holds approximately $1 trillion of our debt, and Japan holds about $1.3 trillion. Foreign investors in total own about one-third of our debt. Our total debt outpaces our GDP now.

Those who believe that government spending is stimulative to the economy are generally wrong. While certain government projects can provide some economic benefits, deficit spending is certainly harmful to the economy.

The Banking System

Long-term rates are lower than short-term rates today. A correction in this inverted yield curve would cause long-term rates to rise significantly, and this could have a significantly negative impact on the U.S. economy.

I contemplate a scenario wherein consumers begin to lose confidence in the banking system in this episode. This could lead to insolvency and a cascading of negative economic events.

I explain the role of the Federal Reserve in the economy in this important episode. I also explain the Fed’s regulatory role over the banking system. It is important to understand the role of The Federal Reserve in setting interest rates along with the role played by the market itself.

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“We will spend more on interest expense by fiscal year 2028 than we spend on national defense.” John Warren