US national debt reaches $38.5 trillion, implications for bitcoin and gold

The U.S. national debt has risen to $38.5 trillion, the highest amount the country has ever owed to domestic and foreign lenders, according to debt dashboards. More than 70% of that debt is owed to domestic lenders, with the remainder held overseas led by Japan, China and the United Kingdom.

With U.S. GDP closer to $30 trillion, the debt-to-GDP ratio exceeds 120%. The climb reflects large pandemic-era spending and decades of fiscal outlays on infrastructure, the military and social programs; interest payments now top $1 trillion annually, more than defence spending. The level of indebtedness is generally seen as bullish for assets such as bitcoin and gold because authorities may respond by keeping interest rates low to limit debt-servicing costs.

The story notes that President Donald Trump has repeatedly called for the Federal Reserve to lower rates to 1% or lower, and that prominent U.S. officials, including former Treasury Secretary and Fed Chair Janet Yellen, have said mounting debt could prompt the Fed to prioritize minimizing interest costs over controlling inflation, a scenario described as fiscal dominance.

Analysts say rising debt can push the government to borrow more, prompting higher yields that may lead central banks to act as buyers of last resort for short-dated debt, steepening the yield curve as long-duration yields rise and short-duration yields stay depressed.

Key Topics

Crypto, Us National Debt, Bitcoin, Gold, Federal Reserve, Janet Yellen