The personal-finance website WalletHub on Friday released its new Credit Card Debt Study, which found that consumers added $21 billion in debt during the third quarter of 2024.

Early results for the fourth quarter of the year show preliminary data for October at a new record high for credit card debt in the month, in absolute terms.

WalletHub editor John Kiernan wrote, “Even though that third-quarter increase was 31% smaller than last year’s and total debt is just 3% above where it was last year after adjusting for inflation, we are still in fairly dangerous territory,” said Kiernan.

WalletHub writer & analyst Chip Lupo responded via email to follow up questions from The Center Square.

Those early Q4 results showing record high credit card debt for October are alarming-do we know what’s driving that at all?

“The record-high credit card debt in October 2024 reflects a 3% year-over-year increase after inflation adjustments, driven by rising interest rates, holiday spending and lingering economic pressures. While Q3 debt growth slowed compared to 2023, total debt remains high at $1.29 trillion, signaling potential challenges ahead for consumers,” said Lupo.

Has WalletHub done any analysis of how much credit card debt the average American puts on during the holidays?

“While we didn’t analyze this specifically, WalletHub found that holiday budgets this year range from just over $200 to more than $4,000, depending on factors such as income, existing debt, and cost of living,” said Lupo.

Any advice on balance transferring to avoid interest?

“Transferring your credit card balance to a low or 0% APR card can be a smart way to save money and pay down debt faster. When considering a balance transfer, focus on cards offering 0% introductory APRs with promotional periods up to 21 months. Such offers significantly reduce interest payments, provided you can pay off the transferred balance before the regular APR kicks in. Remember, most cards charge a balance transfer fee of about 3%, though some will waive this fee entirely. Calculating these costs upfront is crucial to ensure the move saves money,” said Lupo.

With holiday spending in full swing, many Americans are expected to add to credit card debt before the end of the year.

“Nearly half of Americans still have debt from the holidays from last year,” said Lupo. “The fact that people are still paying off debt from last holiday season makes you wonder if they are going to fall into that trap again or are they cutting back because of last year’s debt?”

Sixty-eight percent of WalletHub respondents said Santa will be less generous this year because of inflation. And about a third said they’ll spend less on holiday shopping this year compared with 2023.

Treasury International Capital (TIC) data published on Nov. 18 show foreign investors purchased $169 billion in U.S. government bonds in September, totaling a record $8.673 trillion.

Foreign investors bought a mix of short- and long-term bonds. Treasury bills—maturities between 30 days and 1 year—continue to appeal to bond investors, providing yields as high as 4.6 percent.

Japan and China, the two largest holders of U.S. debt, trimmed their holdings in September.

Tokyo erased about $6 billion, lowering its portfolio of Treasury securities to $1.123 trillion. Beijing reduced its holdings of U.S. government bonds by more than $2 billion to $772 billion.

While China has steadily decreased its exposure to Treasurys over the past several years, its holdings have changed little since September 2023.

Belgium ($41 billion), the United Kingdom ($21 billion), France ($16 billion), and Singapore ($9 billion) were the leading buyers, TIC figures show.

Hong Kong was the only other foreign market to register a nearly $3 billion decline.

The trend of foreign investment into U.S. Treasury securities has been unsurprising, given their vast demand at auctions over the last several months.

During the $42 billion auction of 10-year bonds on Nov. 5, indirect bidders—commonly foreign entities—purchased 62 percent of the supply. Direct bidders—domestic investors—bought less than a quarter of the issued bonds.

Foreign investors also acquired nearly two-thirds of the supply of 30-year bonds at the $25 billion auction on Nov. 6.

The yields in the United States bond market are some of the highest in the world. The U.S. Treasury market is also one of the largest and most liquid corners of international financial markets. Investors are hungry for yields with central banks unwinding their restrictive policy stances and launching a new easing cycle by cutting interest rates.

Despite the Federal Reserve following through on its rate-cut endeavors, Treasury securities have remained elevated. The benchmark 10-year Treasury yield, for example, has climbed nearly 80 basis points since the Fed lowered the federal funds rate for the first time in more than four years in September. As of Nov. 19, the 10-year bond is hovering at about 4.4 percent.

Treasury yield increases have also helped support the U.S. dollar.

The U.S. Dollar Index (DXY), a gauge of the greenback against a weighted basket of currencies, has surged nearly 2 percent over the past month, lifting its year-to-date gain to close to 5 percent. It also rallied to a one-year high of above 107.00 on Nov. 14.

The international reserve currency has rocketed on the futures market recently, shifting Fed policy expectations, with investors penciling only three quarter-point rate cuts by the end of next year, according to the CME FedWatch Tool.

“The potential for fewer cuts from the Fed and a more dovish ECB [European Central Bank] has been a big factor behind the dollar’s advance over the last few months,” said Adam Turnquist, the chief technical strategist at LPL Financial, in a note emailed to The Epoch Times.

Charles Seville, the senior director at Fitch Economics, believes the ECB will reduce interest rates faster amid weakening economic data.

“Although unemployment has yet to rise, labour markets are cooling and wage pressures subsiding,” Seville said in a research note last month.

“Past monetary tightening is clearly still affecting the economy. The ECB appears concerned that eurozone economic growth will undershoot its September forecasts, putting more downside pressure on inflation when it’s already close to target.”

The rate-setting Federal Open Market Committee will hold its next two-day policy meeting on Dec. 17 and 18.

The U.S. dollar’s future direction will also depend on Wall Street’s confidence that President-elect Donald Trump will extend the expiring Tax Cuts and Jobs Act and enact his sweeping tariff plans.

While a strengthening dollar benefits consumers and importers, it can also harm domestic companies that export their goods and services to foreign markets. The president-elect and his team have previously questioned the long-standing strong-dollar policy as they try to resurrect U.S. manufacturing.

“We have a big currency problem,” Trump told Bloomberg Businessweek this past summer, calling it a “tremendous burden” on U.S. businesses.

“Nobody wants to buy our product because it’s too expensive.”

However, Trump also pledged to protect the dollar hegemony and its chief reserve currency status, telling an audience of business leaders at the Economic Club of Chicago in October that the country could transition to “third-world status” if it the king dollar were dethroned.

First, let me put some crucial numbers and concepts into perspective. You often hear the media, politicians, and financial analysts casually toss around the word “trillion” without appreciating what it means. A trillion is a massive, almost unfathomable number.

The human brain has trouble understanding something so huge. The image below shows stacks of $100 bills and a human for reference.

Suppose you had a job that paid you $1 per second, or $3,600 per hour. That amounts to $86,400 per day and about $32 million per year. With that job, it would take you 31.5 years to earn a billion dollars. With that job, it would take you over 31,688 YEARS to earn a trillion dollars.

Suppose you earned $75,000 a year, which is the typical household income in the US. It would take you over 13 million years to make a trillion dollars. If you had a trillion one-dollar bills, you could cover the surface area of Delaware twice over. If you stacked a trillion one-dollar bills on top of each other, it would reach 67,866 miles high, about one-fourth of the distance from Earth to the moon. If you took that same trillion one-dollar bills and instead stacked them end-to-end, the length would exceed the distance between the Earth and the sun.

So that’s how enormous a trillion is.

When politicians carelessly spend and print money measured in the trillions, they are in dangerous territory. And that is precisely what the fiat currency system has enabled the US government to do.

Today, the US federal debt has gone parabolic and is over $35 TRILLION. To put that in perspective, if you earned $1 a second 24/7/365—about $31 million per year—it would take over 1,109,080 YEARS to pay off the US federal debt. And that’s with the unrealistic assumption that it would stop growing.

In short, the US government can’t repay its debt. It can’t even pay the interest expense without going into further debt. Default is inevitable.

It Will Not Be an Explicit Default

The US government is out of options and cannot repay what it has borrowed. Therefore, the question is not whether the US government will default but how.

Consider the recurring debt ceiling farce in the US Congress, which has been raised over 100 times since 1944 to avoid an explicit default. When faced with a choice, politicians always choose the most expedient option.

In this case, that means issuing more debt rather than making tough budget decisions or explicitly defaulting. That raises an important question: who will buy all this debt (Treasuries)?

Historically, there has been a vast foreign appetite for Treasuries, but not anymore. In the wake of Russia’s invasion of Ukraine in 2022, the US government has launched its most aggressive sanctions campaign ever.

The US government and its allies froze around $300 billion of the Russian central bank’s reserves—the nation’s accumulated savings.

It was a stunning illustration of the political risk associated with the US dollar and Treasuries. It showed that the US government could deny access to another sovereign country’s reserves at the flip of a switch.

Then, in April 2024, President Joe Biden signed the REPO Act into law. It allows the US government to seize frozen Russian state assets and transfer the funds to Ukraine.

In short, the US dollar and Treasuries have become weaponized in a way they had not before. They are now clearly not neutral assets worthy of forming the bedrock of the international financial system but political tools for Washington to coerce others.

The rising political risk attached to Treasuries has made them even less attractive as a store of value. Many countries are undoubtedly wondering if the US government will seize their savings if they run afoul with Washington in even the most trivial ways.

China is one of the largest holders of US Treasuries, and it indeed took note of what is happening. Since 2022—when the US froze Russian state assets—China has sold about 25% of its Treasuries, an enormous change in such a short period.

Even US allies, like Japan, have cut their Treasury holdings. There are numerous other examples. The bottom line is that it’s clear the world isn’t hungry for US debt right now as supply is exploding.

In the bond market, when demand for a bond falls, the interest rate rises to entice buyers and holders. However, the US government cannot allow interest rates to rise because the skyrocketing interest expense has become an urgent threat to its solvency.

The interest expense on the federal debt is already bigger than defense spending and is set to become the largest item in the US government’s budget in months.

If higher interest rates are off the table and cannot entice more natural buyers, who will buy all this debt? The only entity capable of doing this is the Federal Reserve, which buys Treasuries with dollars it creates out of thin air.

Here’s the bottom line.

The US government can’t pay off its debt. They won’t explicitly default. They can’t entice a meaningful amount of new Treasury buyers by allowing interest rates to rise. That means currency debasement is their only practical option.

Fed Chair Powell’s recent pivot to monetary easing and rate cuts is compounding the situation. That means the Fed has given up on bringing inflation down… even though it remains well above their target. It’s an incredible failure and will have ENORMOUS investment implications for the US dollar and gold.

If the gold price is already hitting record highs, imagine what will happen when the Fed flips back to easing with even more currency debasement than the previous rounds of stimulus.

I think the gold price could skyrocket. The last time the US experienced runaway inflation was in the 1970s. Then, gold skyrocketed from $35 per ounce to $850 in 1980—a gain of over 2,300% or more than 24x.

I expect the percentage rise in the price of gold to be at least as significant as it was during the 1970s. While this megatrend is already well underway, I believe the most significant gains are still ahead.