Despite its name, the Federal Reserve is not a government agency. It controls the federal funds rate, which indirectly influences everything from mortgage rates to auto loans. And because the U.S. government is the largest borrower in the country, the Fed’s decisions deeply affect the national debt and how much it costs to manage it.

Currently, the U.S. owes more than $37 trillion in national debt, with portions held by individuals, foreign governments like China and Japan, and the Federal Reserve itself. Interest payments on that debt are now the fastest-growing expense in the federal budget—outpacing even military and healthcare spending. The cost of simply servicing that debt continues to rise.

To put it in perspective, if interest rates were cut by just 1%, the government could save around $370 billion annually. However, lowering rates comes with risks. It could encourage even more borrowing, increase spending, and add to inflation. It’s a delicate balance with no easy answers.

Meanwhile, inflation continues to erode purchasing power for average Americans. As the government prints more money to cover deficits, the value of the dollar drops, driving up prices on everyday goods and services. While wages have remained mostly stagnant, the cost of living has surged—leaving many families financially strained.

But not everyone suffers equally. Investors with real estate or stock holdings often benefit from inflation, as asset prices tend to rise over time. Additionally, higher interest rates create opportunities for safer investments, like Treasury ETFs such as SGOV, which currently offer yields over 4%. These allow individuals to earn strong returns by lending money to the government.

Looking ahead, if Trump returns to office in 2026, we could see aggressive interest rate cuts and major policy shifts that would further impact inflation, the debt burden, and investment strategies. It’s a reminder that government decisions at the highest level ripple down to our wallets and investment accounts.

In the end, taxpayers shoulder the burden of government overspending and rising debt. But informed investors can navigate these challenges by understanding how debt, inflation, and interest rates interact. Staying educated and adaptable is key to protecting your wealth in an increasingly complex economic environment.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

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• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

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