The federal debt of the United States has reached a new all-time high, exceeding $40 trillion for the first time. dollars, with the speed of its accumulation causing even more concern than its amount itself.
The federal debt exceeded $40 trillion dollars, according to data from the US Treasury, recording a new all-time high. The amount alone is impressive. But what worries economists and markets most is the speed with which it is accumulating.
Just less than a decade ago, US debt stood at $20 trillion. dollars. Now it has doubled. And in the last five months alone, it has increased by about 1 trillion dollars.
Even more worryingly, over-indebtedness does not take place in a period of deep recession or extraordinary economic collapse. The U.S. economy is still growing, but the government continues to spend much more than it receives.
For the first ten months of the current fiscal year, the deficit has already reached about 1.8 trillion.dollars.
Debt is growing faster than Washington itself expected
The passage of 40 trillion.
It came earlier than even official calculations predicted a few years ago.
The Congressional Budget Office estimated in May 2023 that the US would reach this level in 2028.
Reality anticipated the predictions by about two years.
The causes are well known but now have a cumulative effect: the aging of the population is constantly increasing spending on Social Security and Medicare, while successive tax cuts and large fiscal support packages have widened the deficits.
About 10,000 Baby Boomers retire every day, while older people are living longer and workers who fund social security systems are not growing at the same rate.
The problem is therefore not temporary. It is structural.
The most expensive bill is interest
For years, the U.S. could raise debt without servicing it because interest rates were extremely low.
That era is over. Interest payments are expected to exceed $1 trillion this year. dollars, reaching an all-time high. Within five years they have more than tripled.
Interest is now almost at the same level as Medicare spending and is one of the largest categories of the federal budget.
America spends more on servicing old debt than it does on national defense.
This is precisely the point where the problem begins to become political and economic at the same time.
The larger the budget absorbs interest, the less room is left for infrastructure, education, social policy or new crises.
And as the debt grows, so does the interest. Debt begins to give rise to new debt.
The bond market is starting to ask for a bigger price
The dam of 40 trillion. it didn't break at a neutral moment. On Tuesday, the yield on the 30-year U.S. Treasury hit its highest level since 2007, while the 10-year bond moved near the highest levels of Trump's second term.
Yields are rising because investors are asking for a higher fee to lend to the U.S. government for decades.
The causes are many: fears about inflation, huge budget deficits, a larger supply of corporate bonds due to the artificial intelligence boom and uncertainty around the course of interest rates.
But the increase in debt itself worsens the equation.
More debt means more issuance.
More versions mean more buyers need to be found.
And in order to find more buyers, the yields must remain attractive.
Why the 10-year bond concerns every American
The yield on the 10-year government bond does not only concern the US Treasury.
It is a point of reference for a huge part of the economy. It affects mortgages, auto loans, and business financing. When it rises, borrowing costs spread to households and businesses.
Thus, the 40 trillion. dollars do not remain a number on a state balance sheet.
They are transferred to interest rates, investments, the housing market and finally disposable income.
This is also the reason why the Trump administration has begun to show obvious nervousness about the course of long-term returns.
Bessed's intervention takes on another dimension
In this context, the decision of the Ministry of Finance to increase the buybacks of long-term government bonds becomes even more important.
The government is not just trying to improve the liquidity of the market.
It is trying to prevent the surge in long-term yields from turning into another mechanism for the deterioration of public finances.
Because the higher the yield at which the US Treasury borrows, the greater part of the budget will be required for interest in the future.
And the faster the debt itself will increase.
The 50 trillion. It's not a distant scenario
Michael Peterson, head of the Peter G. Peterson Foundation, warns that with today's course the US debt could reach 50 trillion in just six years.
This does not mean that the US is one step away from some classic debt crisis.
The dollar remains the world's main reserve currency, and the U.S. Treasury bond market remains the deepest and most important in the world.
But the issue changes character. The market does not wonder if the US can pay.
He wonders how dearly they will have to pay to continue borrowing at this rate.
And that's a very different question.
The danger point
The 40 trillion dollars is not the crisis in itself.
But it is at this point where many pressures begin to converge: higher interest rates, rising interest rates, large deficits, an aging population and a market that is no longer willing to finance the state in terms of the past decade.
That's why the real problem is not whether America can issue another trillion dollars of debt. Maybe. The question is how much this next trillion will cost.
For years, the U.S. could defer the bill because money was cheap. At 40 trillion dollars of debt and with yields rising, the bill is now starting to catch up.
naftemporiki.gr
The Congressional Budget Office estimated in May 2023 that the US would reach this level in 2028.
Reality anticipated the predictions by about two years.
The causes are well known but now have a cumulative effect: the aging of the population is constantly increasing spending on Social Security and Medicare, while successive tax cuts and large fiscal support packages have widened the deficits.
About 10,000 Baby Boomers retire every day, while older people are living longer and workers who fund social security systems are not growing at the same rate.
The problem is therefore not temporary. It is structural.
The most expensive bill is interest
For years, the U.S. could raise debt without servicing it because interest rates were extremely low.
That era is over. Interest payments are expected to exceed $1 trillion this year. dollars, reaching an all-time high. Within five years they have more than tripled.
Interest is now almost at the same level as Medicare spending and is one of the largest categories of the federal budget.
America spends more on servicing old debt than it does on national defense.
This is precisely the point where the problem begins to become political and economic at the same time.
The larger the budget absorbs interest, the less room is left for infrastructure, education, social policy or new crises.
And as the debt grows, so does the interest. Debt begins to give rise to new debt.
The bond market is starting to ask for a bigger price
The dam of 40 trillion. it didn't break at a neutral moment. On Tuesday, the yield on the 30-year U.S. Treasury hit its highest level since 2007, while the 10-year bond moved near the highest levels of Trump's second term.
Yields are rising because investors are asking for a higher fee to lend to the U.S. government for decades.
The causes are many: fears about inflation, huge budget deficits, a larger supply of corporate bonds due to the artificial intelligence boom and uncertainty around the course of interest rates.
But the increase in debt itself worsens the equation.
More debt means more issuance.
More versions mean more buyers need to be found.
And in order to find more buyers, the yields must remain attractive.
Why the 10-year bond concerns every American
The yield on the 10-year government bond does not only concern the US Treasury.
It is a point of reference for a huge part of the economy. It affects mortgages, auto loans, and business financing. When it rises, borrowing costs spread to households and businesses.
Thus, the 40 trillion. dollars do not remain a number on a state balance sheet.
They are transferred to interest rates, investments, the housing market and finally disposable income.
This is also the reason why the Trump administration has begun to show obvious nervousness about the course of long-term returns.
Bessed's intervention takes on another dimension
In this context, the decision of the Ministry of Finance to increase the buybacks of long-term government bonds becomes even more important.
The government is not just trying to improve the liquidity of the market.
It is trying to prevent the surge in long-term yields from turning into another mechanism for the deterioration of public finances.
Because the higher the yield at which the US Treasury borrows, the greater part of the budget will be required for interest in the future.
And the faster the debt itself will increase.
The 50 trillion. It's not a distant scenario
Michael Peterson, head of the Peter G. Peterson Foundation, warns that with today's course the US debt could reach 50 trillion in just six years.
This does not mean that the US is one step away from some classic debt crisis.
The dollar remains the world's main reserve currency, and the U.S. Treasury bond market remains the deepest and most important in the world.
But the issue changes character. The market does not wonder if the US can pay.
He wonders how dearly they will have to pay to continue borrowing at this rate.
And that's a very different question.
The danger point
The 40 trillion dollars is not the crisis in itself.
But it is at this point where many pressures begin to converge: higher interest rates, rising interest rates, large deficits, an aging population and a market that is no longer willing to finance the state in terms of the past decade.
That's why the real problem is not whether America can issue another trillion dollars of debt. Maybe. The question is how much this next trillion will cost.
For years, the U.S. could defer the bill because money was cheap. At 40 trillion dollars of debt and with yields rising, the bill is now starting to catch up.
naftemporiki.gr
