Elon Musk Claims United States Will Be Bankrupt, Now What?

The US debt now sits at $34 trillion and is growing by about $1 trillion every 100 days. A statistic came out recently that claimed 76% of all personal income tax is now going to service the national debt.

It’s for that reason Musk recently made the claim that the US is headed for bankruptcy.

America is headed for bankruptcy fyi https://t.co/O6FH5BK4aQ

— Elon Musk (@elonmusk) July 26, 2024

So, what happens if he’s right?

Key Points

• US bankruptcy would devalue the dollar, cause hyperinflation, lead to government default, and trigger financial and international crises.
• Essential services may be cut, food costs rise, and unemployment increase due to reduced government and business spending.
• Save for six months of expenses, diversify income, review budgets, spread investment risk, invest in education, plan for job loss, secure insurance, and maintain health.

If US Goes Bankrupt, What Happens?

The first obvious fallout of bankruptcy would be a loss of confidence whereby the US dollar would lose its status as the world’s reserve currency. The likely fallout thereafter is that the value of the dollar would drop, and would lead to hyperinflation.

Where do we sit on the timeline? According to Musk, Zimbabwe style hyperinflation looms large on the horizon.

Where are we with dollar value destruction, you might ask? pic.twitter.com/0LD8OggFqu

— Elon Musk (@elonmusk) July 22, 2024

The next step is a government default whereby the government may be unable to pay its bills, such as salaries for federal employees, social programs, and the national debt. A default on national debt would likely have a dramatic impact on financial markets and trigger an international crisis.

As people lose access to essential services, the fallout is most likely widespread civil unrest and an economic collapse that could lead to a full-scale depression, with few jobs and low pay.

With the buying power of the currency plunging, food costs are likely to rise and the government might print money to cover its costs, leading to even higher food prices.

Businesses and government agencies are likely to cut spending too, resulting in higher unemployment and cuts to essential services like health care and education.

With such a dire outcome, what can you do to protect yourself?

How To Survive US Bankruptcy?

To prepare for US bankruptcy, aim to have enough savings to cover six months of essential living expenses and keep your emergency fund in a liquid form, such as a high-yield savings account, to ensure quick access when needed.

It’s also a good idea to diversify your income sources, such as through side hustles, freelance work, or part-time jobs so as to reduce dependency on a single source. Consider also investments that generate passive income, such as dividend-paying stocks, rental properties, or even peer-to-peer lending.

This is the time you’ll want to regularly review and adjust your budget to cut non-essential expenses. Make sure to prioritize spending on necessities and limit discretionary spending.

When it comes to investing, spread risk across different asset classes and avoid making hasty investment decisions based on short-term market movements.

As Buffett says the best investment is the one in yourself so this is the time to invest in your own education and skill development to increase job security and career prospects.

With all that said, make sure to plan for the worst case scenario and have a plan in place for potential job loss or significant income reduction. Take stock of your insurance needs, such as health, disability, and life insurance, to protect against unforeseen events.

This is the time to focus on your health too which is essential for managing stress and staying productive during tough times.

Above all, be prepared to adapt your plans and strategies as the economic environment changes.