U.S. August Deficit Hits $345B as Gold and Bitcoin Surge
The U.S. government posted a $345 billion deficit in August, with receipts of $344 billion far below $689 billion in spending. Major outlays included Medicare at $141 billion and Social Security at $134 billion, while net interest payments climbed to $93 billion, now the third-largest expenditure, highlighting the mounting impact of rising borrowing costs on federal finances.
The Federal Reserve is expected to cut rates by 25 basis points this month. However, historical precedent suggests such moves may not be straightforward: in September 2024, a 100-basis-point cut coincided with a spike in long-term yields—the 30-year Treasury jumped from 3.9% to 5%, and currently sits around 4.7%. With inflation accelerating, further rate cuts could push yields higher, increase debt servicing costs, and intensify fiscal pressures.
Markets are reacting sharply. Gold surged to nearly $3,670 per ounce, marking a nearly 40% year-to-date gain, while Bitcoin climbed above $115,000, reflecting growing investor demand for alternatives amid rising concerns about debt sustainability and long-term fiscal risks.
