America’s Illusion of Growth: How Debt Is Propping Up a Slowing Economy 

Recessions Are Inevitable— Delaying Them, Creates Larger Bubbles 

The U.S. economy is still expanding— but barely. And more importantly, it’s becoming increasingly clear why it’s growing at all. 

Economic growth in 2025 did not come from a surge in productivity, rising real wages, or a renaissance in manufacturing. It came from debt. Massive, relentless government borrowing has become the primary engine keeping headline growth alive. 

In 2025 alone, roughly $1.8 trillion was added to the federal deficit— nearly matching the pace of borrowing seen during prior emergency-level spending periods. Federal debt has now pushed past $38 trillion and stacking fast. A level once considered politically and mathematically unthinkable. What was once “extraordinary” is now routine. 

This isn’t stimulus anymore. It’s structural dependence. 

Debt Is No Longer a Temporary Tool— It’s the Foundation 

The most telling shift isn’t just the size of the debt— it’s the cost of maintaining it. 

Interest payments on the national debt are now one of the fastest-growing line items in the federal budget, rivaling major discretionary programs. Every dollar spent servicing past borrowing is a dollar that cannot be spent on infrastructure, education, innovation, or genuine economic investment. 

And unlike past cycles, today’s borrowing isn’t occurring during a deep recession. It’s happening during “growth.” 

That should concern investors. 

When economic expansion requires ever-larger doses of deficit spending just to avoid contraction, it signals an economy losing momentum— not gaining strength. Over time, this dynamic raises borrowing costs, distorts capital allocation, and embeds long-term inflationary pressure into the system. Understand more about Debt Cycles 

Inflation May Be Quieter— But It Hasn’t Left 

Inflation is no longer making daily headlines, but that doesn’t mean households are feeling relief. 

Prices continue to rise most aggressively where people can least avoid them: 

• Food
• Housing
• Insurance
• Healthcare 

Even modest annual increases compound quickly, quietly eroding purchasing power. Wages have not kept pace for many households, and savings buy less each year. Inflation rarely arrives with sirens— it shows up in grocery aisles, rent renewals, and insurance premiums. 

The result? A growing gap between economic statistics and lived reality. 

The Labor Market Is Softening, and Confidence Is Cracking 

By 2025, the unemployment rate had climbed to roughly 4.6%, the highest level since 2021. Hiring has slowed. Layoffs have become more frequent. And consumer confidence has fallen to multi-month lows. 

Households aren’t panicking— but they’re no longer comfortable. 

When job security weakens while costs remain elevated, financial fragility spreads quickly. That uncertainty feeds directly into spending behavior, savings rates, and long-term planning. 

Financial Stress Is Becoming Systemic 

At the household level, pressure is building fast. 

Total U.S. household debt has climbed above $18 trillion, with credit card balances nearing $1.2 trillion. More families are relying on revolving credit just to manage routine expenses. Delinquencies are rising. Defaults are following. 

That stress isn’t confined to consumers. 

Corporate bankruptcies surged in 2025 to their highest level since the Great Recession, reflecting tighter credit conditions, higher financing costs, and persistent inflation. Personal bankruptcy filings have also increased, confirming that strain is spreading across the economic spectrum. 

This is what late-cycle stress looks like— before it becomes unavoidable. 

Markets Are Rising— But Fewer People Are Participating 

Equity markets reached record highs in 2025, but the gains have been increasingly narrow and concentrated. Much of the market’s performance has become disconnected from manufacturing activity, earnings growth, and broad economic participation. 

At the same time, stocks and bonds— traditionally diversifying assets— have shown a growing tendency to move in the same direction. That undermines the protection investors once relied on from a traditional 60/40 portfolio. 

De-dollarization is no longer theoretical— it is already underway. Central banks around the world are accelerating gold purchases even with gold trading at or near all-time highs, a clear signal that price is secondary to protection. These institutions are not buying gold to chase returns; they are buying it to hedge systemic risk— recessions, geopolitical fractures, and, increasingly, exposure to the U.S. dollar itself. When the stewards of global reserves choose tangible assets over paper claims despite elevated prices, it reflects a strategic shift away from dollar dependence and toward assets that exist outside political and monetary control. Learn more about de-dollarization. 

Volatility doesn’t need a crash to cause damage. It only needs uncertainty. 

Why “Owning Something Real” Is Back in Focus 

Modern finance is built largely on promises: 

• Stocks rely on future earnings
• Bonds rely on repayment 
• Currencies rely on discipline 

When confidence is high, those promises ‘feel’ stable. When confidence erodes, they can change quickly. 

That helps explain why central banks around the world have been aggressively increasing their gold reserves. For three consecutive years, central banks have added more than 1,000 metric tons of gold annually, well above historical norms. The majority now expect their gold holdings to continue rising over the next five years. 

This isn’t speculation. It’s preparation. 

Gold does not depend on policy decisions, political outcomes, or economic cycles to exist. It has no counterparty risk. It doesn’t require confidence in someone else’s balance sheet. 

In an era defined by expanding debt, persistent deficits, and policy uncertainty, many investors are re-evaluating what it truly means to own an asset rather than merely hold a claim. 

Reliable Recession Warning Signal 

The U.S. Treasury yield curve is one of the most reliable recession warning signals in modern economic history. It tracks interest rates across different maturities of U.S. government bonds, which under normal conditions reward longer-term investors with higher yields. When short-term Treasury rates rise above long-term yields— creating what is known as a yield-curve inversion— it signals severe economic stress. This indicator has an unbroken record, having preceded every U.S. recession since the 1960s. In these environments, stocks often face heightened volatility and downside risk as growth expectations weaken, bonds provide limited protection under inflation and heavy debt issuance, and the U.S. dollar grows increasingly exposed to long-term debasement as deficits and monetary intervention accelerate.