Time magazine recently asked President Trump about his plan, after the midterm elections, for the $40 trillion national debt. That debt is now growing faster than the economy.
Part of his answer pointed to inflation. "Certain levels of inflation will also pay off the debt very rapidly," he said.
Jaspreet Singh calls inflation a hidden tax. The people who pay it are the ones who don't understand how it works, while the financially educated use that same inflation to get rich.
Making sense of what inflation does to your portfolio starts with research, and AI tools can speed that up if you use them well. Briefs Finance CEO Jaspreet Singh is hosting a free livestream on November 17 to show how he and his analysts use ChatGPT and Claude to research stocks.
Who Really Pays for Inflation
From 1971 to 2025, government-reported prices rose about 700%. Over those same 54 years, the median household income rose about 830%.
That's why the government and the central bank keep saying incomes have outpaced inflation. The story changes when you look at the things people spend the most money on.
| Item | Growth, 1971 to 2025 |
|---|---|
| Reported inflation | About 700% |
| Median household income | About 830% |
| New car | About 1,200% |
| Median house (before property taxes) | About 1,500% |
| Public four-year university | More than 2,000% |
Cars, houses, and college outran reported inflation and household incomes by a wide margin. On those costs, the average person has gotten poorer.
Somebody got richer, though. Investors who put money into the S&P 500 over those same years saw it grow about 7,000%.
Reinvest the dividends - the cash payments companies send shareholders - and that growth tops 33,000%. A $1,000 investment in 1971 would be worth more than $300,000.
The winners were the people who invested their money and reinvested the profits. Workers living on a salary slowly got poorer, even as official numbers said they were getting ahead.
When inflation rises, three things happen. Some people get incredibly rich, many people get poorer, and the real value of the national debt shrinks.
How the National Debt Creates Inflation
The government's only form of revenue is tax dollars. From 2020 to 2025, it collected about $27 trillion.
It spends that money on Social Security, Medicare, the military, infrastructure, and more. A balanced budget might spend $25 trillion of that $27 trillion.
Instead, the government spent about $39.5 trillion from 2020 to 2025. That's a deficit of more than $12 trillion, and more than $12.5 trillion of the national debt piled up in those years alone.
That money gets borrowed from three places:
- Regular people who lend the government money in exchange for interest
- Foreign countries like Japan, the United Kingdom, and China
- The Federal Reserve, the U.S. central bank
Jaspreet likes to point out that the Federal Reserve isn't a bank you can deposit money in, isn't sitting on reserves of cash, and isn't really federal. What it can do is create money out of thin air and lend it to the government.
Printing Money Isn't Creating Wealth
You could print a stack of $100 bills, and you wouldn't be any wealthier. You'd just have more pieces of paper.
The same goes for the dollar. It isn't backed by gold, only by the government's promise, so more dollars without more wealth means each dollar is worth less and prices rise.
Government spending does boost the economy. A contract to build a bridge creates construction jobs, and a contract for missiles sends money to defense companies.
But prices climb as everyone realizes $100 doesn't buy what it did three years ago. That's how inflation happens.
It's a hidden tax because raising taxes to build that bridge would need Congress to approve it, while printing money doesn't. You pay later at the store, and for the average person, incomes haven't kept up.
The Last Time America Shrank Its National Debt
The last time U.S. debt was this big a problem was 1946, right after World War II. The debt was $269 billion, which sounds tiny today.
What made it big was its size next to the economy, measured by GDP, or the total value of everything the country produces. GDP was $228 billion, putting the debt-to-GDP ratio at about 118%.
By 1981, the debt had grown to $1 trillion, but the economy had grown to a little over $3 trillion. The debt-to-GDP ratio fell to about 32%, because the economy grew faster than the debt.
| Year | National debt | Economy (GDP) | Debt-to-GDP |
|---|---|---|---|
| 1946 | $269 billion | $228 billion | About 118% |
| 1981 | $1 trillion | A little over $3 trillion | About 32% |
| Today | More than $40 trillion | About $32.5 trillion | About 125% |
Today's ratio is worse than it was after World War II. From here, there are only three ways out.
Three Ways Out of the National Debt
Option 1: Default
For a person, a default is like declaring bankruptcy - you stop paying your mortgage, and the bank is very upset. For the U.S., it would mean the regular people, foreign countries, and Federal Reserve who lent it money don't get paid back.
That would trigger a global calamity, a recession or depression, and a horrible financial crisis. History shows why it's unlikely.
In 1971, the U.S. was close to a default. The dollar was backed by gold, and foreign countries that no longer trusted the dollar wanted their gold back.
Then-President Richard Nixon had a solution. He directed Treasury Secretary Connally to temporarily suspend turning dollars into gold, taking the U.S. off the gold standard.
So what is fiat money? It's what the dollar became - fiat currency, money backed by a government's promise instead of a physical asset like gold.
Nixon could now write big checks to every country the U.S. owed. They got their money, the U.S. kept its gold, and the cost was the inflation problem that followed.
Option 2: Inflate It Away
Imagine you bought the median house 50 years ago for about $50,000 with a $40,000 mortgage. If you took out that same $40,000 mortgage today, it wouldn't feel very big.
Inflation makes debt feel smaller. If you want $40 trillion to feel smaller, you create more inflation.
To see which investments win in that world, picture putting $100 each into stocks, oil, gold, a median house, Treasuries, and silver in 1970.
1970 to 1980: High inflation. Nixon took the dollar off gold and a lot of money was printed. A conflict in the Middle East then sent prices soaring, and gold, silver, and oil were the big winners.
1980 to 1990: Rate hikes. The Fed raised interest rates to double digits to crush inflation, which also slowed the economy and pushed unemployment up. Stocks, housing, and Treasuries kept rising, while gold and silver fell.
1990 to 2000: The tech boom. Inflation faded, the Fed started cutting rates, and the economy took off. Stocks became the clear winner, followed by oil.
| $100 invested in 1970 | Value in 1980 | Value in 2000 |
|---|---|---|
| Stocks (S&P 500) | $234 | $4,300 |
| Gold | $1,600 | $770 |
| Median house | $276 | $720 |
| Treasuries | $200 | About $720 |
| Silver | $1,000 | About $330 |
Oil also held up well, with $100 growing to $900 by 2000. Silver, the 1970s star, had sunk to $260 by 1990 and finished last.
Each decade rewarded a different set of assets. The inflation winners of the 1970s were the losers of the 1980s.
Option 3: Scott Bessent's Plan to Outgrow It
Treasury Secretary Scott Bessent wants the economy to grow faster than the debt. After World War II, three forces made that happen:
- Manufacturing: The U.S. was making half of everything.
- Suburbanization: New highways and single-family homes spread across the country.
- The baby boom: More babies meant more demand.
Today's plan is known as 3-3-3:
| Goal | Target | As of recording |
|---|---|---|
| Economic growth | 3% | About 2.1% |
| Deficit (spending above tax revenue) | 3% | About 6% |
| Extra oil production | 3 million barrels a day | About 400,000 barrels a day |
Plenty of people ask why the government doesn't just raise taxes or cut spending. It really is that simple, but it has a cost, and no president wants to be the one who pays it.
Nobody likes paying more in taxes. Cutting the deficit from 6% to 3% also means the government, the biggest spender in the economy, spends a lot less.
Jaspreet estimates that could shrink the economy by about 3%. During the 2008 financial crisis, the economy fell slightly more than 4% and unemployment hit 10%, so this would be the government causing a recession itself.
Semiconductor Stocks, Rare Earth ETFs, and Where Tax Dollars Are Going
If the U.S. does outgrow its debt, there will be winners. One way to find them is to follow where the government is investing tax dollars, since it wants these four industries to win.
AI and Semiconductor Stocks
President Trump wants the U.S. to beat China in the AI race. Leading in AI means leading in semiconductors, the chips that act as the brains of computers.
- SMH: A VanEck semiconductor ETF
- A second AI and semiconductor fund for similar exposure
- A Nasdaq 100 fund: The broadest option, holding the 100 largest non-financial companies in the market, mostly tech companies
Rare Earth ETFs
Rare earths are metals the U.S. needs to make iPhones, laptops, fridges, and missiles. The U.S. relied on China for them forever, and after U.S. tariffs, China cut off supply.
The Trump administration is now putting tax dollars and new regulations behind rebuilding that supply chain. One rare earth ETF is a VanEck fund focused on rare earth and strategic metals.
American Manufacturing
Bringing manufacturing jobs home is one of the goals of President Trump's tariffs. One example is a SPDR Industrial Select Sector fund.
Mining and Metals
Building a U.S. supply chain takes metals and mining. A SPDR fund focused on that industry is one way to get exposure.
Jaspreet has said he isn't sponsored by any of these ETF companies and has no affiliation with them, and that he discloses it when he's invested. No one can guarantee these will go up, and investing always carries risk.
His advice is to do your own research, and to use AI to help. He'll show exactly how at his free November 17 livestream, where investors who attend live also get his team's top 10 AI prompts.
Inflation will keep collecting its hidden tax. The only choice is whether you're paying it or positioned on the other side.
