U.S. Posts $345B August Deficit as Gold and Bitcoin Rally
The U.S. government recorded a $345 billion deficit in August, with $344 billion in receipts overshadowed by $689 billion in spending. Medicare ($141B) and Social Security ($134B) were the largest outlays, while net interest payments surged to $93 billion, now the third-largest expense, highlighting rising borrowing costs and their growing impact on federal finances.
The Federal Reserve is expected to cut rates by 25 basis points this month. However, past experience suggests rate cuts may not be straightforward: in September 2024, a 100-basis-point easing coincided with a sharp spike in long-term yields—the 30-year Treasury jumped from 3.9% to 5%, currently around 4.7%. With inflation accelerating, rate cuts could further increase yields, raise debt servicing costs, and exacerbate fiscal pressures.
Markets have responded sharply. Gold surged to nearly $3,670 per ounce, marking a year-to-date gain of almost 40%, while Bitcoin climbed above $115,000, as investors seek alternatives amid rising concerns over debt sustainability and long-term fiscal challenges.
