August Deficit in the U.S. Reaches $345B, Net Interest Among Largest Ever, Boosting Gold and BTC

U.S. August Deficit Hits $345B as Gold Approaches $3,670 and Bitcoin Tops $115K

U.S. government spending surged in August, driving the federal deficit to $345 billion. Total receipts reached $344 billion, while spending climbed to $689 billion. Medicare ($141B) and Social Security ($134B) were the largest expenditures, but net interest payments surged to $93 billion, now the third-largest line item, highlighting the growing strain of rising borrowing costs on federal finances.

The Federal Reserve is expected to cut rates by 25 basis points this month. Yet history shows that rate cuts may not yield straightforward results: in September 2024, a 100-basis-point easing coincided with a sharp spike in long-term yields—the 30-year Treasury surged from 3.9% to 5%, now at roughly 4.7%. With inflation accelerating, further rate cuts could exacerbate price pressures, raise debt servicing costs, and deepen the fiscal challenge, creating a complex backdrop for policymakers and markets.

Markets are already reacting. Gold surged near $3,670 per ounce, posting nearly a 40% gain year-to-date, while Bitcoin climbed above $115,000, reflecting investor demand for alternatives amid growing concerns over debt sustainability and fiscal pressures.