- The Federal Reserve issued its second rate cut in as many months, confirming new easing cycle.
- America’s record $38 trillion debt continues to limit future policy options and weaken confidence in the dollar.
- Physical gold remains a proven shield against both debt-driven inflation and currency devaluation.
Two Forces, One Outcome: A Weaker Dollar
The Fed’s October rate cut, its second in two months, marks a firm turn toward easier money. After two years of aggressive tightening, policymakers began loosening policy in September and followed through with another 25-basis-point cut this week. Together, the moves confirm that the central bank is prioritizing growth and employment concerns over stubbornly above-target inflation.
On its own, the move is already significant. But paired with a $38 trillion national debt, it highlights a deeper problem: the government is cutting rates while spending keeps rising. That combination puts the long-term value of paper assets at risk and makes real, tangible assets like gold more appealing.
The Fed’s Dilemma: Ease Now, Pay Later
The decision to cut again in October came as economic data continued to soften. Corporate earnings remain mixed, consumer debt has reached record highs, and hiring has slowed. Federal Reserve Chair Jerome Powell noted that while inflation remains around 3%, risks to the labor market have become the Fed’s greater concern.1
Analysts now expect at least one more rate cut by early 2026 if growth continues to decelerate. ING Chief International Economist James Knightley anticipates another 25-basis-point reduction in December, followed by 50 basis points of cuts in early 2026.
“Tariff-related inflation will remain a concern in the near term, but it is the jobs market that is becoming the more pressing issue for the Fed,” Knightley said.2
But the underlying dilemma hasn’t changed: rate cuts can cushion short-term pain, yet they deepen the long-term challenges of debt and inflation.
3
America’s debt has surged past $38 trillion. And it’s growing faster than ever. The country added another trillion dollars in just two months. Economists warn the total could reach $39 trillion before mid-2026. The Congressional Budget Office projects the debt-to-GDP ratio will climb to 156% by 2055. It’s driven by spending that consistently outpaces economic growth. Persistent high debt can also offset the benefits of rate cuts by keeping long-term yields elevated. Which in turn increases the government’s future interest expenses.4
Interest costs are already spiraling. In fiscal year 2025, the U.S. spent $1.21 trillion on interest payments alone. That’s 17% of total federal spending and more than double the share from 2021. Compounding matters, the ongoing government shutdown continues to weigh on growth. Hundreds of thousands of federal workers remain unpaid, and delayed data releases have forced the Fed to rely on secondary indicators such as unemployment claims and private payroll reports.5
Warnings from Experts
Michael Peterson is CEO of the Peter G. Peterson Foundation. He called the $38 trillion milestone “the latest troubling sign that lawmakers are not meeting their basic fiscal duties.” Maya MacGuineas is president of the Committee for a Responsible Federal Budget. She described the figure as “appalling.” MacGuineas added that key programs like Social Security and Medicare are just years away from trust fund depletion.6
Credit rating agencies have echoed those warnings. Moody’s downgraded the U.S. credit rating in May from Aaa to Aa1, citing unsustainable debt growth. Both Fitch and S&P have issued similar downgrades.
Rate Cuts and Market Implications
For consumers, lower rates mean some relief on mortgages, car loans, and credit cards. For small businesses, they ease borrowing costs and improve cash flow. But for the broader economy, the message is more complex.
With inflation still above the Fed’s 2% target and government finances under strain, easier money may stoke the very pressures it’s meant to relieve. The Fed itself has acknowledged the balancing act of supporting jobs without reigniting price instability.
Internal divisions persist within the Fed. Some officials favor a slower pace of cuts to prevent inflation from reaccelerating. While others argue for faster action to avoid a deeper slowdown.
Gold’s Role in a Devaluing World
Gold continues to benefit from this environment of falling real yields and rising debt. Unlike dollars or bonds, gold’s value isn’t tied to government solvency or policy credibility.
Historically, periods of rate cuts and high debt have coincided with strong gains in gold prices. Investors are seeking assets immune to currency debasement. With the Fed easing and fiscal spending unchecked, the incentive to hold physical gold as a hedge against both inflation and devaluation has rarely been stronger.
Conclusion
The Fed’s latest cuts may bring temporary relief to borrowers, but they don’t address America’s deeper fiscal imbalance. As the government borrows more and the dollar weakens, retirement savers are looking for assets that can preserve value through shifting policy cycles.
Physical gold, held outright or through a Gold IRA, offers a time-tested safeguard against both inflation and monetary uncertainty. To learn how a Gold IRA can help you, contact American Hartford Gold today at 800-462-0071.
