Transcription
The US national debt has now reached nearly $40 trillion. 39.6 according to the Treasury. Now, that is about $115,000 for every American.
But here's a number that stops me. The interest on that debt alone is now running closer to a trillion dollars a year according to the Congressional Budget Office. Now, roughly what the country spends on its entire military just to service what it already owes.
Now, my next guest says that this isn't really an economic story at all. It's a constitutional one, and it runs straight through the one thing this channel cares about the most: gold. Stay with me.
All right, welcome back. I'm Jeremy Saffron. My guest today is a constitutional scholar, not a markets guy, and that is exactly why I wanted to bring him on the show. Now, he argues that the country quietly walked away from the limits on federal power the founders wrote down. And this debt is the bill.
Now, there's even a thread in here about the day Washington reached into America's gold and what the Constitution did and did not do about it. William Watkins, author of the brand new book, Independent Guide to the Constitution, joining us now. Welcome, Bill. Thanks for making the time.
>> Jeremy, it is great to be with you.
>> Um, yeah, I want to kind of zoom out. I mean, by the end, I want to answer one thing: what all this kind of means for the money in our, in our audience's hands. But uh, Will, Bill, let's start with um, that number. You know, the debt pushing $40 trillion. And you know, you argue that this is not just years of overspending. It's a constitutional failure. So, just explain a little bit to the audience first. What do you mean by that?
>> Well, what I mean is this: we have a constitution of few and defined powers given to the national government. The national government cannot act. It should not be able to spend absent pointing to a specifically enumerated power. Unfortunately, we have gotten away from this strict construction of the document where certain clauses, such as the spending clause and the commerce clause, are used as uh, what the founders would call a general police power. Uh, our government spends uh, and regulates things that it has no independent power to do. And as it has done so, it has piled up debt upon debt. And that's truly why we're in the fix that we're in.
>> Now, Jake, me back a little bit to that original design. There, there's a long-running debate about this, but the reading, kind of, you argue, is that the, the founders didn't hand Congress a blank check, right? I mean, that they, they meant to hold it to a specific kind of limited set of powers. Just lay that original design out for me and how that was kind of supposed to hold the line here.
>> Well, we have to remember that in exchanging the Articles of Confederation for the Constitution, one of the big arguments that the proponents of the Constitution made is, "Hey, we're not really jettisoning jettisoning the federal system uh, established under the Articles. All we're doing is just really invigorating uh, Congress with the powers they already have. This isn't a big deal. The states will still have uh, in Madison's words in Federalist 45, numerous and indefinite powers, the national government few and defined." So, this isn't a real big switch. That was the argument there that the Federalists made, that Hamilton himself made, who we often uh, associate and properly so with aggressive constitutional interpretations, his financial bill. But that is not how the document was sold uh, to the people and the state ratifying convention. So, my argument is simply to go back to those promises that the Federalists made and hold them to it.
>> Yeah. Yeah. That's interesting. I mean, what was the kind of enforcement mechanism? I mean, if Congress interpreted its own powers broadly, who was kind of supposed to stop it? Was it the courts? Was it the states or voters?
>> That's a great question. Uh, one, your primary stopgap measure is the voters in the states. But remember also at this time that the states had their own representation in the Senate. So, they had a mechanism for self-defense that we don't have today with a popular election of senators. Of course, you also had the courts could step in, but Jefferson uh, and Madison and their Kentucky and Virginia resolutions in 1798 ultimately point uh, to the people uh, whether it be in convention or out of doors or at the ballot box, as the ones uh, who are ultimately responsible for curbing government.
>> That's interesting. And I, you know, I know it's kind of a complex topic, but I'm excited about it because it comes back to sound money. I'll just give a little bit of context just to the audience. I mean, you're describing the move from the, the Articles of the Confederation where Congress kind of lacked reliable taxing and regulatory authority, I guess, right? And to the Constitution. But Madison then called the new federal powers few and defined, while powers kind of remained with the states were numerous and indefinite. So, my question here, Bill, is, you know, Hamilton kind of supported it, felt like a broader spending power from the beginning. Doesn't that suggest today's expansive government kind of arose partly from that unresolved founding era disagreement rather than just, you know, abandoning the, the constitutional rule?
>> One could argue that, but I would argue that if we look at Hamilton's uh, representations about what the Constitution would do, his later arguments as Secretary of the Treasury uh, were essentially just he went back on his original promises to push a program that he thought uh, would benefit the nation. Uh, you look at the debates as a whole uh, and I think that supported Hamilton in power was much different than the Hamilton in the New York ratifying convention or the Hamilton of the Federalist, who again, essentially adopted what we would call today a Madisonian argument on the limits of the federal government.
>> Now, there, there was that one moment that you, you kind of came back to as well in the book. I mean, the, the Supreme Court's case in, in 1936 called United States versus Butler. And as you read it, that's the case where the court kind of broadened the spending power, letting Congress spend beyond that enumerated list in the, in the name of the general welfare. In plain terms though, I mean, what changed that day and why does it kind of still show up in your wallet now?
>> What changed that day is the New Deal, is uh, Franklin Roosevelt's New Deal. And how can we as a court uh, rubber stamp, if you will, or allow these programs to go through? A key to that is the spending power. For years, the spending power had been understood uh, in a Madisonian sense, i.e., if you want to spend money, you have to point to an enumerated power. And there's a specific list in Article 1, Section 8. Uh, Hamilton, Joseph Story had argued, uh, you don't really have to point to an enumerated power. Congress has the power to spend and as long as it's for the general welfare, uh, we're good there. The Supreme Court rejected the Madisonian interpretation, went with Hamilton and Story simply because if they did not, they would be in a pitch battle with Roosevelt and imperil the New Deal, which so many people were supporting.
>> Yeah. So, I mean, you know, the guardrails came off. And and let's talk a little bit about why it matters for anyone holding dollars. I mean, the Constitution actually talks about money in hard terms. It gives Congress the power to coin money and it tells the states they cannot make anything but gold and silver coin legal tender. How far have we drifted from what the founders meant by the word money?
>> We have drifted far afield. As you and your viewers uh, know, the founders understood real money to be hard money, gold and silver. As a matter of fact uh, in the debates uh, on the Constitution and the drafting process, there are many statements from uh, various founders that finally we have this opportunity to banish paper money, fiat money now and forever, and gold and silver were to be the money in the United States. Uh, unfortunately uh, especially with the Civil War, war between the states, whatever you wish to call it, uh, with the greenbacks, the Lincoln administration issued, we have a major departure there. And you know, ultimately the Supreme Court upholds that uh, simply not really based on the law, but based on national sovereignty and the idea if we don't rubber stamp this, if we don't approve it, we will have uh, put the government in a terrible spot uh, after they printed all these greenbacks, made them legal tender. So uh, they just rolled with it.
>> Yeah. I mean, you know, 1933, most people at least that watch this channel kind of know the history, but obviously in 1933, Washington called in America's gold and then turned around and revalued it from $20 to $35. Um, the part I kind of want to get your read on is the one that still gets argued. I mean, how was that constitutional? I mean, the government compels people to surrender a hard asset, then marks up the price the moment it holds it all. What does that episode tell you about how far the money power can actually stretch?
>> No, it's absolutely not constitutional. Uh, a true reading of that document, you can find no power where government can take uh, the people's money in that regard. Sure, government can impose uh, in, in, impose excise taxes. With the uh, income tax amendment, you can tax incomes. Uh, but it, you have to stretch that document so far uh, to be able to take the people's gold uh, from them. Uh, there is no constitutional standing for that. Especially again, it's clear that the framers uh, the power to coin money, gold and silver. Uh, this was getting rid of fiat money, which had so plagued uh, the states and the Continental Congress uh, and the war for independence. They saw the damage that it could do, how it robs um, essentially creditors um, of their investments, the value of items they've sold, and they were ready to put a stop to it.
>> Now, I almost want to go back to the greenbacks because it really did begin as a wartime emergency. I mean, how did that emergency power kind of become a permanent federal power to issue, you know, paper legal tender?
>> Well, you know, you have the Lincoln administration made the decision that it would not let the southern states go uh, peaceably. That um, you know, actually at the time, you, there were two waves of secession. The uh, Gulf Coast states that on Lincoln's election um, seceded. But then Virginia and your other border states weren't going to leave the Union until Lincoln decides he's going to call up troops to force um, the southern states to stay in the Union. So, you have this second wave of secession. With those two waves, you're going to need a lot of money uh, to force those states back into the Union. Part of the process for this um, is uh, the greenbacks. This idea that we will make them legal tender uh, throughout the country, that you can suck whatever species uh, is out there into the coffers of the national government and use paper money. And once you sort of build on that paper foundation, uh, it's a house of cards. You just keep on building uh, until it falls. And we're ever closer to it falling, as you and your viewers know.
>> So, I mean, you know, Bill, is, is that the real constitutional turning point? I mean, from, from money whose value was tied to metal to, to money whose value ultimately rested on government authority.
>> Yeah, I would, you know, a lot of people want to talk about uh, properly, you know, Roosevelt and taking gold or even Bretton Woods. Uh, those are all in the conversation. But if you don't start with the war in the 1860s and the Lincoln administration's monetary policy, you're missing the full picture.
>> Yeah. You know, we talked a little bit about 1933 there. And then a couple years later, the Supreme Court upheld the government voiding gold payment clauses in contracts. So, debts no longer had to be paid in gold. And then I think it was '71, the, the last link was cut. The US stopped letting even foreign governments trade their dollars in for gold. Just looking at that whole arc, what is the lesson for someone holding dollars today?
>> Well, I think if you're holding dollars, you have to recognize that there's a great uncertainty that uh, that paper money is really only tied uh, to the coercive power of the federal government. Uh, to the extent it can cause other uh, industries, other people uh, to hand over things of value. There is nothing tangible backing it like gold or silver. U, it's a bit of a shell game that we just smile and keep playing. But uh, it is but a game. There's nothing of real value behind it.
>> Yeah. And just to put that kind of drift into numbers for the audience. When the dollar was still tied to gold in 1971, gold was $35 an ounce. Today, looking at the Kiko spot price, I mean, it's over $4,100, up almost 2% today. So, I mean, a dollar buys a tiny sliver of, of the gold it once did. That is the erosion at the heart of all of this. And I got to ask you, I mean, the clause also names gold and silver. Silver is the kind of the forgotten half. Why, why did they both, why did they write both in?
>> Well, you know, if you look at um, the time, you absolutely had uh, countries uh, using both metals uh, for means of exchange. Uh, both had independent uh, significant value. Uh, you know, obviously we could use um, some sort of other metal. Uh, though the Constitution mentions gold and silver in a theoretical sense, if you had a metal that had great value, you could uh, use that. A country could use that for coining. Though my argument would be uh, gold and silver is what the Constitution says. Absent amendment, we stick with gold and silver.
>> >> Yeah, I mean, that very first kind of coinage law, I think in 19, or 17, 1792, defined a dollar as a fixed weight of silver. I mean, when did a dollar stop being a thing you could weigh?
>> Oh, you know, uh, it's actually, if you look in, as a quick aside here, uh, you know, the Bill of Rights indicates that uh, for a dispute um, over $20, you have a right uh, um, to, you know, trial in the federal courts. Uh, you know, good argument that the measure they were talking about would be the Spanish gold dollar was most often uh, what they were referring to. But, you know, you're absolutely right. Uh, you know, eventually, as you move forward in time, u, as you approach uh, the mid-1800s, I think that's a good point that you can start to see things get out of hand. I mean, I guess we should, I'm nerding out here, Bill. So, so stay, stick with me. Also, the audience should, too. But I, I'll move on a little bit because I want to talk about why it matters now and who's actually paying this bill. I mean, we're nearly a quarter of this debt is, is held abroad. I mean, according to Treasury data, that's foreign investors, obviously, central banks, funds, governments, with Japan and the UK and China all at the top. They own US bonds that they can trade, sell any time. And in your writing, you kind of warn about the day they cash in their chips, meaning they start selling. I mean, obviously, we've seen a little bit of that with this gold rush, but what would that actually look like? And and how worried should investors be about that?
>> No, it worries me uh, greatly because, you know, you hear it often said, "Oh, we just owe it to ourselves, our great national debt." No, we don't. As you just properly pointed out, you listed the top three uh, holders there. But no, foreign governments. And if foreign governments acted in a concerted manner to, as we said, cash in their chips, uh, that could absolutely bring a financial crisis. I mean, we've so eroded even our paper dollar. And with this recent war in Iran, uh, we've been lucky that essentially the dollar has been the medium of exchange for oil. Thank you, Saudi Arabia. But uh, that, that gets undermined and you have, uh, China selling off their holdings. Uh, we could have a serious financial crisis. We could have a Weimar situation. You know, this is good because you can kind of bring it home for me here. I mean, for someone watching who's not a lawyer, just somebody kind of trying to protect their savings, why should this history really change how they think about the dollar?
>> Well, I think it should bring home if you had any doubt uh, that the framers uh, had great perspicacity uh, in trying to ban fiat money, to keep money honest, to keep it real uh, so government could not, via inflation, uh, you know, essentially steal the wage of workmen or business owners. Uh, unfortunately uh, that was gotten around, as we talked about, with the Lincoln administration than others there. But it gives us, it puts us in a world of uncertainty there with our holdings. You can work all your life and accumulate all this paper money and uh, it is, we're so very close to uh, a financial crisis. The value could be gone for that. Whereas if you had used that paper to buy um, hard assets or gold and silver uh, you would have something tangible there. So, we're all at great risk.
>> Yeah. Do you got an opinion here, Bill, as to whether that gold is in Fort Knox? I have to go down there.
>> You know, uh, I imagine there is a good uh, there's a quantity uh, how much I would not want to bet on. And.
>> You know, here's kind of why it lands on this channel. I mean, for thousands of years, obviously, when governments buried themselves in debt or watered down their money, people protected themselves by owning something the government couldn't print: gold, silver, you know. And the founders kind of wrote those two metals into the Constitution as the country's money. So, help me understand the founders' thinking here a little bit. I mean, we talked about it, but what role were gold and silver actually meant to play? And and did they see hard money as any kind of check on the government?
>> Absolutely. If, especially if you look in Jefferson's writings and his economic thought. Uh, the idea is that hard money uh, would force government, for example, if government wanted to get involved in a foreign adventure or a foreign war, you would have to pay for that uh, rather than just printing uh, dollars, inflating the currency. To pay for it, you would have to tax the people. They would feel that bite immediately uh, as the tax gatherer uh, showed up at their door wanting more of their resources. Therefore, the people would use the franchise to limit government, to pull government back from, say, the foreign adventure there. Uh, we've lost that uh, now with uh, paper money and inflation and the way we're uh, Federal Reserve conducts matters.
>> You, I mean, you brought up taxes there. I have to ask you, I mean, in the end, who really pays the bill? Is it higher taxes? Is it inflation quietly kind of eating your savings? Or is it a default? I mean, which, which one does a government usually reach for first?
>> They ought to reach for taxes first, but what we've seen in recent years is uh, the tendency to inflate the currency uh, to pump more dollars out there. Uh, you know, recent examples, you know, the COVID situation, uh, the government just cutting checks uh, that it doesn't have the funds for uh, to essentially everyone in America, or whatever stimulus program um, you want to look at in history, recent history as well. They should uh, look to taxes first, but that imperils them at the ballot box. Then they look to just inflating the currency. And of course uh, that brings up the last matter you mentioned. When does the great default come? Like we're some third-world banana republic defaulting on our debts.
>> Yeah. And I mean, you're, but you brought up COVID there. I mean, the larger concern is kind of that emergency powers rarely disappear when the emergency ends, right? I mean, normalized, it almost felt like they normalized a level of spending and intervention that then became permanent.
>> No, it's a ratchet effect. I mean, think of the best example I can think of of the ratchet effect of government power and economics is rent control in New York City. Uh, that was supposed to be a temporary measure uh, as veterans came home from World War II. Uh, how many people today in 2026 live in rent-controlled apartments still in New York City? Uh, that government is not parted with that power, and it uh, and they rarely do as they accumulate powers.
>> Now, listen, I didn't get you to come on to talk about the bond market, but, you know, this is not just theory. This week, the 30-year Treasury yield has been trading above 5%. And according to Bloomberg, part of what's behind that is the worry about debt and deficits along with sticky inflation and a flood of new bond supply. So, I mean, you know, when the market itself starts pushing back on the borrowing, does that feel like the reckoning that you've kind of been writing about?
>> I think it's a sign of it, at least. Um, I mean, especially right now as we've got the war with Iran heating up again and, you know, these missiles, these jets, how much it costs just a day um, for this, you know, piddly little fight we could call it. It's certainly not a D-Day or, but just with what we're doing there with the bombing and the sorties, that's a lot of money. Markets are taking notice of that. Uh, you add into that uh, Iran's grip, uh, especially now that the Houthis are on board with um, limiting uh, the Strait of Hormuz and the passage of fuel, fertilizer, natural gas. Um, yeah, u, this is a serious situation. It certainly could threaten world war uh, as great powers seek to reopen things. Uh, it also could threaten a great economic catastrophe for the United States.
>> Now, listen, you and I have to talk about your book because it's been uh, interesting to look at. I mean, I, I find it pretty fascinating, this topic obviously, and I think our audience will. And before I let you go, you know, for the person watching who finds this persuasive and honestly a little worried, I mean, you know, what is the one thing that you tell them to watch for to understand kind of going forward?
>> Well, going forward, the first thing that we have to watch for is keep our eyes on that beacon which is the Constitution. Uh, that is, that will tell us how far we have strayed. That will tell us also how to get back home. Uh, if we really realize that we are uh, in dire straits, that we're in a terrible financial situation, that we have a national debt uh, that we can't dream uh, of paying off, that, you know, were we going to do so, I think the assessment the government would have to make on every individual citizen, uh, forget the illegals, u, is about $150,000 per person. Considering most Americans don't even have enough savings to make it a month where they lose their paycheck. Uh, that's not feasible. We're in uh, a dire situation. But constitutional government is an option. Uh, we could go back to that beautiful old federal system of few and defined national powers, numerous indefinite state powers. Uh, trim, retrench, cut back. Um, and life could get back to something manageable.
>> Yeah. I mean, your new book, we should plug it too. It's called the Independent Guide to the Constitution. Um, I got to ask you, last thing here. I mean, if, if the founders could see the balance sheet today, what is the one thing you think would shock them the most?
>> I think the one thing that would shock them the most is they would believe that we had completely abandoned uh, the system of government that they had created and opted to go back to the old British system where Parliament itself was sovereign. Uh, it is said that Parliament uh, by Blackstone, could make or unmake any law as it saw fit. Uh, it, Parliament was the Constitution. They would think that we've adopted that system and unleashed an American Parliament to tax, to spend, and just wreak devastation on our economy.
>> Yeah. I'm going to not leave it on necessarily that note. I want to talk to you just personally about what gives you hope. I mean, is there any, is there still a tool inside the Constitution that could kind of rein this in?
>> Oh, there's a tool. Um, I think I do have hope. Your listeners should have hope in so far as you look at all these great grassroots movements that have sprung up around the country. Uh, the homeschooling movement is a great example uh, as people have seceded from government schools. Uh, Moms for Liberty uh, holding local government bodies accountable, such as that. Those are things for hope. You can build on that in a constitutional sense as people demand um, that their elected representatives, be them senators, uh, house members, uh, what have you, uh, have a fidelity or at least uh, support uh, the Constitution as ratified, not this expansive version today. Uh, we can build on movements like that and maybe slowly claw back uh, some that's that has been taken.
>> Yeah, well said. What a fascinating time to study this stuff. Well, listen, Bill, I appreciate your time. Of course, today. Thanks for coming on Kiko. I think people are very interested in this stuff. We'll put the book down. Of course, you can find out more information as well.
>> Thank you so much.
>> All right, that was Bill Watkins. A very different way to look at a number that gets thrown around far too casually. Nearly $40 trillion. Now, here is what I want to hear from you in the comments. Does the debt get fixed with a vote? Or does the bond market end up fixing this? Tell me below. And if you want to subscribe and have conversations that go past the headline number, hit that button. We do this every day. I'm Jerry Saffron for all of us here at KitKo. Thanks for watching.