US Debt Hits $40 Trillion and Triggers Global Alarm

The record advance of US debt consolidates the generalized fiscal stress outlook mapped recently by our editorial archives, echoing the negative trend observed in the survey where domestic fiscal outflows grew 80% in 5 years and pressure national public accounts. From the perspective of structural macroeconomics, the unbridled expansion of global indebtedness inserts the world economy into an advanced cycle of tightening and liquidity vulnerability, where the excess issuance of sovereign bonds forces a structural rise in long-term yields (Treasuries). This dynamic exhausts global risk appetite, raising the opportunity cost of capital and making deficit financing more expensive in both central and peripheral economies.

The anatomy of this liability reveals that of the current $40.047 trillion, about $32.266 trillion is in the form of securities held by the public, while $7.782 trillion comprises intragovernmental debt. This expansion of over 100% in less than ten years—starting from $19.95 trillion at the 2017 presidential inauguration—was catalyzed by successive fiscal stimulus packages, culminating in the hefty responses to the Covid-19 health crisis managed by the Trump and Biden administrations. Independent budget watchdog groups warn that maintaining this pace will make the costs of social protection programs and debt interest payments unpayable against current tax revenues, raising the risk of systemic solvency crises in the short and medium terms.

For the next 30 days, heightened volatility is projected in international fixed income markets, with investors demanding higher risk premiums to absorb new US Treasury auctions, which tends to keep the dollar under pressure globally and traded above R$ 5.15 in the domestic market. Over a 90-day horizon, the inflationary impact of US indebtedness is expected to reflect in the persistence of priced Commodities.