Elon Musk says America will be ‘toast’ and the US dollar will be ‘worthless’ without quick action – what he means

America is undeniably an economic powerhouse, but Tesla CEO Elon Musk – the richest person in the United States and the world – is sounding the alarm about its financial future.

“The country is bankrupt. If we don’t act, the dollar won’t be worth anything,” Musk said during a recent appearance on The Joe Rogan Experience podcast.

Elon Musk’s alarm focuses on the exploding US national debt, which currently stands at $36.17 trillion. Managing this colossal debt comes at a high price: the payment of interest alone constitutes a significant and growing pressure on public finances.

“Interest payments, which already make up 23% of all government revenue…will just pay interest for now, and that number keeps growing,” Musk explained. “So if we don’t do anything, the entire state budget will be earning interest – there won’t be any money for anything. No, there will be no money for Social Security, there will be no money for Medicare, nothing. This is where we are heading. This is what bankruptcy means.

The numbers paint a grim picture. In fiscal year 2024, interest on the U.S. federal debt totaled $1.126.5 trillion, while the federal government collected $4.92 trillion in revenue.

Musk stressed the urgency of the situation: “I look at the numbers here and I say if we don’t do something, America is toast.”

Whether America can technically go bankrupt is a complex question, because the federal government cannot file for Chapter 11 bankruptcy reorganization. Instead, Congress should decide whether to let the federal government default on its debt, otherwise it could continue borrowing as long as there is demand for government bonds from investors.

“Technically speaking, the government cannot go bankrupt because it only promised to remit a certain amount of dollars; he did not promise what the value of those dollars would be. Because the value of dollars has never been specified, the government can print enough of them to make dollars almost worthless. For the rest of us, the effect is the same as a government failure,” write the co-hosts of the “Words & Numbers” podcast.

In other words, printing money to stay afloat has significant consequences, as inflation erodes the purchasing power of the U.S. dollar. And while that’s a concern, JP Morgan market analysts say, they may not go so far as to predict that the country is “toasted.”

They say the likelihood of the country defaulting on its debt remains “extremely low.” Indeed, the United States benefits from a “unique position” in issuing debt in its own currency – which also happens to be the world’s reserve currency – as well as a strong fiscal base that can help to generate revenue through tax reforms where necessary.

Analysts cite Japan as an example. With a debt-to-GDP ratio of 228%, almost twice the debt of the United States, they argue that it is indeed possible for a country to avoid a fiscal crisis despite a heavy debt burden.

So it remains to be seen whether the situation is as critical as Musk thinks it is – but there is still a way to create your own glimmer of hope. Throughout history, savvy investors have found ways to protect themselves from the blows of inflation. Musk himself outlined this strategy in 2022, just before inflation hits a 40-year high in the United States. “It’s generally better to own physical assets like a house or shares of companies you think make good products, rather than dollars when inflation is high. » he advised.

Here’s a closer look at some of those assets mentioned above.

When inflation rises, property values also rise, reflecting rising costs of materials, labor and land. At the same time, rental income tends to increase, providing landlords with an income stream that adjusts for inflation.

This combination makes real estate an attractive option for preserving and growing wealth when the U.S. dollar loses value.

Over the past five years, the NSA S&P CoreLogic Case-Shiller US National Home Price Index has jumped more than 50%.

You can invest in real estate by purchasing rental properties and becoming a landlord. You can also explore real estate investment trusts (REITs), many of which are publicly traded.

Alternatively, crowdfunding platforms have made it easier for average Americans to invest in rental properties without the need for a large down payment or the burden of property management. Some platforms will even allow you to start earning rental income with investments as low as $100.

Learn more: Jeff Bezos and Oprah Winfrey are investing in this asset to protect their wealth – you may want to do the same in 2024

Investing in stocks of companies that “make good products” has proven to be an effective strategy during the recent inflationary period, with Musk’s Tesla (TSLA) company being a prime example.

Tesla’s innovative and popular electric vehicles have allowed the company to dominate the growing electric vehicle market in the United States. This success has translated into significant rewards for its shareholders: Tesla shares have soared more than 1,500% over the past five years.

Another example is Apple, a company whose flagship product, the iPhone, has the largest share of the US smartphone market. Apple’s ability to consistently deliver sought-after products has also paid off for investors. Over the past five years, Apple shares have surged 260%.

Of course, stocks are inherently volatile and past performance is no guarantee of future results. For the average investor, the Oracle of Omaha Warren Buffett himself has long advocated a simpler strategy: “In my opinion, for most people, the best thing you can do is own the S&P 500 index fund. »

This simple approach gives investors exposure to 500 of the largest U.S. companies across various industries, providing diversified exposure without the need for constant monitoring or active trading.

The beauty of this strategy lies in its accessibility: anyone, regardless of their wealth, can benefit from it. Even small amounts can grow over time, and some apps even let you invest in an S&P 500 ETF with your spare change, making it easier than ever to build wealth alongside the global financial elite.

When it comes to preserving wealth and fighting inflation, few assets have stood the test of time like gold.

The appeal of gold is simple: the yellow metal cannot be printed in unlimited quantities by central banks like fiat currency. And because its value isn’t tied to any currency or economy, gold could offer protection during times of economic uncertainty — or in the type of dollar collapse scenario Musk has in mind.

As inflation erodes the purchasing power of paper currencies, the appeal of gold as a stable store of value often increases, driving up demand. In 2024, gold prices will jump 27%, surpassing $2,600 per ounce.

Schiff believes this is just the beginning. “If gold can go from $20 to $2,600 an ounce, it can go from $2,600 to $26,000, or even $100,000. There is no limit because, once again, gold does not change: it is the value of the dollar that decreases,” he recently declared.

At today’s prices, a rise to $100,000 would represent an astonishing increase of over 3,700%.

It is easy to invest in gold these days. Investors can buy gold bars, own shares of gold mining companies, invest in gold ETFs, and even take advantage of potential tax benefits through a gold IRA.

This article provides information only and should not be considered advice. It is provided without warranty of any kind.