The United States is about to blow through another number that would have sounded completely insane not that long ago: $40 trillion in national debt.
When we wrote about the growing economic storm back in February, the national debt was around $38.6 trillion. Six months later, the Treasury’s current figures put it at roughly $39.94 trillion. We managed to pile on another $1.3 trillion or so before most people had even finished paying off their Christmas credit cards.
Nobody in Washington is going to declare an economic collapse when the counter rolls over to $40 trillion. The stock market isn’t required to crash that afternoon, your bank isn’t going to lock the doors, and the dollar isn’t going to burst into flames. That isn’t the point. The point is that we keep reaching numbers that were once treated as unthinkable, and every time we do, politicians shrug, increase spending again, and assure everyone the bill can be dealt with later.
Later is starting to get expensive.
The $40 Trillion Number Isn’t Even the Scariest Part
Debt by itself does not tell you when an economy is going to break. Countries can carry enormous debt loads for years, sometimes decades. The problem starts when servicing that debt becomes so expensive that it begins eating everything around it.
That is where we are heading.
Federal interest costs have already moved into the trillion-dollar-a-year neighborhood. The Congressional Budget Office projected net interest costs of roughly $1 trillion for fiscal 2026, and the Treasury’s year-to-date figures show interest continuing to chew up a larger chunk of federal spending. This is no longer some accounting problem that can be kicked down the road without consequences. In recent years, interest has already surpassed national defense spending, something that would have sounded absurd during most of modern American history.
And unlike most federal spending, you don’t get to pretend the interest bill doesn’t exist. Congress can fight over an agency budget, delay a project, cut a program or move money from one column to another. Bondholders still expect to be paid.
That is why the current move in Treasury yields matters so much.
As of August 13, the 10-year Treasury yield was trading around 4.6 percent and the 30-year was still above 5.2 percent. The 30-year yield recently reached levels not seen since 2007. The Treasury’s Wednesday auction of $42 billion in 10-year notes cleared at 4.683 percent, the highest auction yield since 2007. Investors are still buying American debt, so this is not some bullshit story about the Treasury suddenly being unable to find buyers. The problem is that those buyers are demanding a hell of a lot more money for the privilege.
That distinction matters. A Treasury auction doesn’t need to “fail” for you to have a problem. If the government has to keep paying higher rates on a rapidly growing pile of debt, the cost compounds as older low-rate debt matures and gets replaced.
Washington borrowed the money years ago. The refinancing bill is arriving now.
The Bond Market Eventually Ends Up in Your House
Most Americans don’t follow Treasury auctions, and there is no reason they should have to. But the rates coming out of that market eventually work their way into almost every corner of your financial life.
Mortgage rates are the easiest example. Freddie Mac reported that the average 30-year fixed mortgage was 6.67 percent on August 13. A year earlier it was 6.58 percent, and anyone waiting around for the return of the 3 percent mortgage has been waiting a long damn time.
Higher Treasury yields also put pressure on business loans, commercial real estate, auto financing and other forms of credit. Companies that have to refinance debt at higher rates have fewer dollars available for hiring, expansion and payroll. Home buyers get less house for the same monthly payment. Small businesses become more cautious. Consumers who are already stretched start putting necessities on credit cards.
This is how a debt problem in Washington slowly turns into a household preparedness problem.
It doesn’t require hyperinflation or a wheelbarrow full of cash to buy bread. It can simply mean everything you need costs more, financing it costs more, your paycheck doesn’t stretch as far, and losing your job becomes much more dangerous because finding another one takes longer.
That version of an economic crisis is already a hell of a lot more relevant to the average American than the movie version of “economic collapse.”
Washington Just Ran a $432 Billion Deficit in One Month
July should probably have received more attention than it did.
The federal government collected about $334 billion and spent roughly $766 billion during the month, leaving a $432 billion deficit. Some of that gigantic number was a calendar issue because August 1 fell on a weekend, moving about $99 billion in payments into July. Adjust for that and the deficit was closer to $333 billion.
That is still an obscene amount of money to borrow in one month.
Through the first ten months of fiscal 2026, the federal deficit has reached roughly $1.8 trillion. That is already more than the government borrowed during the entire previous fiscal year, and there are still two months left. The Joint Economic Committee calculates that Washington spent about $1.40 for every dollar it collected during the fiscal year through July.
Keep in mind, we aren’t talking about the middle of another 2008-style financial meltdown or the government shutting down the economy during COVID. We have managed to normalize enormous deficits during what is supposedly a functioning economy.
And this problem was not created by one guy or one political party. Both parties have had their hands all over this mess for decades. Anyone telling you the entire $40 trillion problem began with the last president, the current president or the guy they want you to vote for next is selling politics, not math.
The math is the problem.
The Job Market Is Starting to Look a Lot Less Comfortable
This is where the economic story gets much more important from a preparedness standpoint.
The official unemployment rate was only 4.1 percent in July, which on the surface doesn’t look particularly frightening. But the rest of the report was considerably uglier.
The economy lost 23,000 payroll jobs in July. May and June were revised downward by another 103,000 jobs combined. Average payroll growth over the previous twelve months was only 34,000 per month. Labor-force participation has fallen to 61.4 percent, and the employment-to-population ratio is sitting at 58.9 percent. About 1.8 million unemployed Americans have been looking for work for 27 weeks or longer.
That doesn’t mean America is suddenly in another Great Depression. It means the labor market has become a lot less forgiving than the unemployment headline makes it look.
For preppers, that distinction matters because job loss is one of the most likely personal SHTF events you will ever face. You are statistically a hell of a lot more likely to have your finances wrecked by losing your income than by waking up tomorrow morning to some Hollywood-style national collapse.
And now we get to throw AI into the mix.
AI Hasn’t Destroyed the Job Market Yet, But Companies Are Already Using It to Cut People
Back in February, we warned that the biggest economic threat from AI wasn’t some Terminator fantasy. It was what happens when corporations realize they can eliminate workers faster than the economy can create replacement jobs.
We are starting to see pieces of that now.
There is some good news in the July layoff data. U.S. employers announced 33,429 job cuts, the lowest monthly total in two years and down sharply from the same month last year. Anyone claiming layoffs are exploding across every part of the economy right now is ignoring the actual numbers.
But buried inside those numbers is something much more interesting: AI was the number-one reason companies cited for layoffs for the fifth straight month. Employers attributed 10,970 July cuts to AI, roughly one-third of all announced cuts for the month. Through July, companies have cited AI in 112,713 announced job cuts this year.
That doesn’t prove a robot personally walked into 112,713 cubicles and fired somebody. Companies have plenty of incentives to slap the term “AI” on ordinary restructuring, and even Challenger has cautioned against treating every AI-cited layoff as a direct one-for-one replacement.
But pretending nothing is happening would be equally stupid.
Corporations spend enormous amounts of money looking for ways to reduce labor costs. If software can allow ten people to do the work that previously required twenty, most companies are not going to keep the other ten people around because they enjoy paying salaries.
The technology doesn’t have to become smarter than humanity. It just has to become cheaper than you.
That is an economic preparedness issue that almost nobody was thinking about five years ago.
Inflation Hasn’t Gone Away Either
The July Consumer Price Index was up 3.4 percent from a year earlier. Food was up 3 percent, shelter was up 3.2 percent, and energy was still 14.7 percent higher than a year ago. Average hourly earnings, meanwhile, were up 3.2 percent over the same period.
So no, prices are not exploding every month. In fact, July’s month-to-month CPI increase was only 0.1 percent.
But that doesn’t mean the things you already got screwed on suddenly became cheap again.
That is something people routinely misunderstand about inflation. A lower inflation rate means prices are rising more slowly. It doesn’t rewind the increases that already happened. The grocery bill that jumped during the last several years doesn’t magically return to the old price because inflation falls from 8 percent to 3 percent.
Families simply have to absorb the new level.
Household debt is now roughly $18.8 trillion according to the New York Fed. The total actually dipped slightly during the second quarter, and aggregate delinquency measures improved somewhat, so I’m not going to manufacture a household-debt apocalypse that the current data doesn’t show. But $18.8 trillion of household obligations sitting alongside expensive credit and a softer job market still leaves an enormous number of families with very little room for error.
That “room for error” is what preparedness is really about.
Economic Collapse Probably Won’t Look the Way People Think It Will
There is a tendency in the preparedness world to imagine economic collapse as one giant event. Banks close on Monday. The dollar becomes worthless Tuesday. Trucks stop delivering Wednesday. By Friday everyone is trading silver coins for chickens.
Could something catastrophic happen quickly? Of course. Banking panics, currency crises, wars and sovereign debt crises have happened throughout history.
But there is another form of economic collapse that is much less dramatic and probably more dangerous precisely because people learn to live with it.
Your purchasing power gets shaved down year after year. Housing becomes increasingly unaffordable. Insurance goes through the roof. Interest eats more of every monthly payment. Good jobs become harder to land. Families finance groceries. Young people stop believing they will ever own a home. Government borrowing grows so large that trillion-dollar deficits become background noise.
Nothing technically “collapses.” Your standard of living does.
People keep going to work. Restaurants stay open. Amazon packages keep arriving. The television tells you GDP grew. Meanwhile, the average family becomes more dependent on debt and less capable of surviving one bad month.
That is the slow-motion economic emergency people should be preparing for right now.
Stop Preparing for a Date and Start Preparing for Economic Pressure
I have been writing about economic preparedness for years, and one of the biggest mistakes people make is waiting for some official signal that tells them it is finally time to act.
Forget trying to predict the exact date of a collapse.
If America somehow fixes its debt problem, inflation falls back toward 2 percent, interest rates drop, AI creates more good jobs than it destroys and we enter twenty years of prosperity, being financially stable, self-reliant and well supplied is not going to hurt you.
If things go the other direction, you are going to be damn glad you started before everybody else figured it out.
Our full guide on preparing for an economic collapse goes much deeper into this, but there are several areas I would be concentrating on right now.
Get Rid of The Financial Weights that are Dragging You Down!
High-interest consumer debt becomes an anchor when income disappears. If you are carrying credit-card balances at 20 percent or more, there are very few guaranteed investments on earth that are going to outrun what that debt is doing to you.
Start cutting obligations that don’t improve your life or your ability to survive. Know what it actually costs to keep your household operating for a month. Build an emergency fund. Keep some physical cash in small denominations somewhere secure so a banking outage, cyberattack or payment-system failure doesn’t leave you unable to buy basic supplies for a couple of days.
Cash on hand is not an investment strategy. It is redundancy.
We covered many of these financial steps in our guide to surviving economic hard times, and they matter even more when credit is expensive and the job market is weakening.
Turn Some of Your Money Into Things You Will Actually Need
There is a strange habit in this country where people will spend six hours trying to figure out whether gold, Bitcoin or the S&P 500 will outperform next year while having three days of food in the house.
I’m not telling you what investment to buy. I’m telling you that there is value in already owning things you know your family will consume.
Food that stores well. Water and filtration. Medical supplies. Toiletries. Batteries. Backup lighting. Tools. Replacement parts. Fuel stored legally and safely. A way to cook when the power is out. Things you already use and would otherwise be forced to buy later at whatever price the market decides to charge.
That isn’t panic buying. It is moving some future spending into the present while you have money, availability and choices.
Build More Than One Way to Make Money
If your entire household survival plan depends on one employer continuing to deposit one paycheck into one account every two weeks, you have a single point of failure.
That should bother a prepper just as much as having one flashlight or one way to purify water.
Start building another income source while you still have the luxury of doing it slowly. Freelance work, consulting, repairs, a small business, online income, skilled trade work, reselling, whatever fits your abilities. It doesn’t have to replace your salary tomorrow. Even a few hundred dollars a month can become enormously important when the primary paycheck disappears.
And if AI is coming for your industry, do not sit around waiting for your employer to tell you your position is safe. Companies do not give advance warnings because they care about your financial planning.
Learn the technology, use it where it makes you more valuable, and at the same time start developing abilities that are difficult to automate: repairing things, building things, operating equipment, selling, negotiating, working with people, emergency skills, trades and anything else tied to the physical world.
Build Actual Self-Reliance
This is where economic preparedness and traditional survival preparedness become the same thing.
The more things you can do yourself, the less money you need someone else to provide.
Grow some food. Learn how to repair things instead of automatically replacing them. Know basic first aid. Have backup power. Get your communications squared away. Know your neighborhood. Improve your home security. Have a plan if you need to leave and another plan if you need to stay put for an extended period.
A person with useful skills, supplies, low debt and multiple ways to make money is difficult to destroy financially.
A person living paycheck to paycheck with $20,000 on credit cards, no food in the house and a job that can disappear after the next quarterly earnings call is one bad Friday afternoon away from disaster.
That is the difference preparedness makes.
The Real Warning Behind $40 Trillion
The national debt crossing $40 trillion will make headlines for a day or two. Politicians will blame one another, economists will argue about debt-to-GDP ratios, somebody on television will explain why it either means the end of America or means absolutely nothing, and then the news cycle will move on.
What matters is what happens after the headline disappears.
The federal government is already running enormous deficits. Long-term borrowing costs are back near levels we haven’t seen since before the 2008 financial crisis. Interest is consuming an enormous piece of the federal budget. Mortgage rates remain near 7 percent. Inflation is still running above the Federal Reserve’s target. Payroll employment went backward in July, earlier job numbers were revised lower, and corporations are openly telling us AI is part of the reason they are eliminating positions.
None of those things individually guarantees an economic collapse.
Put them together and they give you a pretty damn good reason to stop pretending everything is normal.
This isn’t about hiding in a bunker waiting for the dollar to die. Economic preparedness means making sure that if your paycheck disappears, prices jump again, credit tightens, banks have problems, supply chains get hit or Washington finally loses control of the debt problem, your family is not starting from zero.
We have spent years telling people the same thing about hurricanes, wildfires, blackouts and every other disaster: the worst possible time to start preparing is after everyone agrees there is an emergency.
The same rule applies to the economy.
America is about to cross $40 trillion in debt. You don’t need to know exactly what finally breaks, or when it happens, to understand that carrying less debt, keeping more cash, storing necessities, developing useful skills, creating additional income and becoming less dependent on fragile systems puts you in a better position for whatever comes next.
That is what economic preparedness is supposed to be.
Are You Prepared for an Economic Collapse?
If you haven’t seriously looked at your economic preparedness plan, start with our complete guide to preparing for an economic collapse. We cover the warning signs, financial steps, survival supplies, self-reliance skills and preparations that can help protect your family during a prolonged economic crisis.
You should also read Surviving the Financial Storm: Essential Tips for Economic Hard Times and our February report, Economic Storm? Deficits, Bankruptcies, and the AI Revolution That Could Change Everything, for more on the financial and employment threats building beneath the surface.
Read the full article here