How the Debt Black Hole Is Warping the Economy: Private Credit Market Edition -

There is a giant debt black hole, and it is warping everything around it in the economy. 
When we mention the debt black hole, you probably think of the national debt first. It is on the verge of eclipsing $40 trillion. But consumers and corporations are also leveraged to the hilt.
In this episode of the Midweek Memo podcast, host Mike Maharrey exposes the ramifications of the debt problem by highlighting the growing risk of a private credit market meltdown and explaining how it could impact the broader financial markets and the economy. 
He also proposes four reasons why central banks are piling up gold and replacing dollars. (These two themes overlap!)
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Mike opens the show by putting the number "1-trillion" in perspective.
<ul>
<li>There are 1 million seconds in 11.5 days. A trillion seconds is about 32,000 years. </li>
<li>If you could say one number every second, it would take about 11.5 million days to count to 1 trillion. </li>
<li>If you had spent $1 million every day since the birth of Christ, you still wouldn't have spent $1 trillion.</li>
<li>If you line up dollar bills end-to-end, you could go to the moon and back around 203 times with $1 trillion. You could wrap them around the Earth about 3,893 times.</li>
<li>If you stacked 1 trillion $1 bills, the dollar tower would reach 67,866 miles.</li>
<li>If a cup of coffee costs $3, you could buy 333 billion cups of coffee with $1 trillion. </li>
<li>If you had 1 trillion dollars, you could give every person on Earth approximately $125.</li>
<li>One trillion grains of rice would weigh about 20,000 metric tons. </li>
</ul>
<blockquote>
"So, that's a trillion. And the national debt is nearly 40 times bigger."
</blockquote>
Mike asserts that the growing debt bubble is the most significant impact on the economy that most people don't seem all that concerned about. 
But not just the national debt. There’s $5.17 trillion in consumer debt in the US alone. And then there’s the corporate debt, which is also at record levels.
<blockquote>
"I call it the debt black hole. Greg Weldon came up with that term, and I wish it would go viral. It’s a perfect description of the debt situation. A black hole has such strong gravitational pull that it literally warps everything around it. It even sucks light into it, thus the term black hole. That’s what debt is doing to the economy. It’s why the Fed keeps talking about slaying inflation but is still running historically loose monetary policy. It’s why I keep insisting the central bank isn’t likely to raise rates and will probably lower them again sooner rather than later. It’s why the bond market is tanking. It’s one of the reasons central banks are buying gold."
</blockquote>
"So today, I want to talk a little about the debt situation, focusing primarily on the private credit market, because it is definitely a sector that could spark bigger problems."
Before delving into the private credit market, Mike highlights the July Treasury statement. 
<blockquote>
"Without tariff revenue to paper over excessive spending, the U.S. ran the biggest monthly budget deficit in five years last month. The Trump administration spent $432.31 billion more than it took in in July. It was the highest monthly budget shortfall since March 2021, amid the COVID stimulus era and the third-largest deficit on record."
</blockquote>
Mike also notes that all of this debt comes at a price. 
<blockquote>
"Interest expense has grown into the second-largest spending category in the federal budget behind only Social Security. In July, the Treasury forked out $117.57 billion on interest payments alone. That was down slightly from a record $185 billion in June. July interest payments pushed total interest expense to $1.17 trillion through the first 10 months of fiscal 2026. That was up 15.5 percent compared to the same period in fiscal ’25."
</blockquote>
Mike emphasizes that the national debt is just one leg of a debt trifecta.
<blockquote>
"As of Q1, total non-financial corporate debt stood at $14.45 trillion, according to Federal Reserve data. That was up nearly 5 percent from the previous year. Today, I want to focus on a small but significant portion of that corporate debt – the private credit market, because it is under growing stress, and it’s the kind of thing that could blow up and spread into the broader markets."
</blockquote>
Mike notes that private loans make up only about 10 percent of total corporate debt. However, a meltdown in the market could spill over into the broader financial markets and the economy.
He explains the mechanics of the private credit market, emphasizing that it is an example of incentives created by government and central bank policies.
<blockquote>
"The private credit market grew in both size and importance after the 2008 financial crisis. With banks facing stricter capital and lending regulations, private financing funds stepped in to fill the financing gap. Meanwhile, investors poured money into the private credit funds, hoping for bigger returns than they could earn by buying traditional bonds."
</blockquote>
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Investors are incentivized to take more risk in a fiat money system with a constantly devaluing currency. 
Mike notes that the dynamics in the private credit market aren't unlike the subprime mortgage market before the 2008 financial crisis, including mainstream pundits and analysts insisting that this problem isn't really a problem.
Mike highlights the numbers, explaining that private loan defaults are at five-year highs. There are also a growing number of loans on the industry's "watchlists."
<blockquote>
"Think of this as the waiting room for defaults."
</blockquote>
The Wall Street Journal offered a bit of optimism, pointing out that “losses could abate if interest rates decline and economic activity remains robust without pushing inflation higher.”  
Mike says, "That's a lot of ifs!"
<blockquote>
"While the CPI has cooled, <a href="https://www.moneymetals.com/news/2026/08/13/beyond-cpi-the-complete-inflation-story-july-2026-005134">other data points point to increasing inflation</a>. And even with the CPI moderating, it remains well above the 2 percent target. That means <a href="https://www.moneymetals.com/news/2026/03/19/gold-the-federal-reserve-and-a-catch-22-004773">the Fed needs to keep interest rates higher for longer</a>. There isn’t a lot of hope for rate relief as long as the economy keeps stumbling along and CPI remains stubbornly above the mythical target."
</blockquote>
Mike calls this "a recipe for a credit meltdown that could spread into the broader markets."
<blockquote>
"Don’t forget that everything was fine in subprime in 2006 and 2007 – until it wasn’t. When you think back to those days, everybody was saying everything was fine, even in early 2008. Of course, it wasn’t. And things aren’t fine now. But people are good at sweeping things under the rug. When things unravel, it happens quickly, so you want to be prepared beforehand."
</blockquote>
Mike points out that central banks seem to be preparing now. 
<blockquote>
"You know who has been taking advantage of the price dip over the last several months? Central banks. Central bank gold buying was one of the pillars supporting the gold bull market last year, and it has continued to bolster the market even as it faced significant headwinds."
</blockquote>
Mike lists four factors that seem to be driving this central bank gold rush. 
<ol>
<li>Geopolitical risk</li>
<li>The weaponization of the dollar.</li>
<li>Worries about the U.S.’s deteriorating fiscal situation.</li>
<li>Regime uncertainty</li>
</ol>
Mike points out that these are also four good reasons for you to pile up gold. 
He wraps up the show with a call to action, urging listeners to call 800-800-1865 to talk to a Money Metals precious metals specialist today.
<h2>Articles Mentioned During the Show</h2>
<a href="https://www.moneymetals.com/news/2026/08/18/four-reasons-central-banks-are-piling-up-gold-005146">Four Reasons Central Banks Are Piling Up Gold</a>
<a href="https://www.moneymetals.com/news/2026/08/14/sports-betting-the-newest-gen-z-investment-strategy-in-the-war-against-inflation-005138">Sports Betting the Newest Gen Z Investment Strategy in the War Against Inflation</a>
<a href="https://www.moneymetals.com/news/2026/07/18/the-ramifications-of-a-long-term-bond-bear-market-005079">Are We in the Early Stages of a Bond Bear Market?</a>

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