The US government is borrowing more than ever before. New figures show that the total national debt continues to rise and has now reached astronomical proportions. Investors and policymakers are concerned: how long can this be sustainable? And what does that mean for the financial markets?
US national debt rises to $38.5 trillion
The US national debt has risen to a new record $38.5 trillion, according to figures from the US Debt Clock. The situation amounts to more than 120 percent of gross domestic product (GDP), a level usually associated with countries in financial distress.
For comparison: according to De Nederlandsche Bank (DNB), Dutch government debt amounted to only 43 percent of GDP in 2024.
The debt is the result of years of government spending on defense, infrastructure and social programs, among other things, supplemented by skyrocketing costs during the COVID-19 pandemic.
More than 70 percent of the debt is held by American investors and institutions. The rest is divided between countries such as Japan, China and the United Kingdom.
Interest costs mount up quickly. At current interest rates, the US government now pays more than $1 trillion per year in interest alone. That is more than the entire defense budget.
It is also one of the reasons why President Donald Trump has repeatedly pushed for lower interest rates. In addition, a new chairman of the central bank, the Federal Reserve (Fed), will be appointed in May. Trump has already indicated that he wants to elect someone who actively wants to lower interest rates.
Remarkably, his own policies actually worked against this. Current Chairman Jerome Powell previously indicated that Trump’s trade policy, including high import tariffs, has actually delayed interest rate cuts due to higher inflation.
More bonds, higher interest rates
The high debt also has an impact on the bond market. Because the government has to borrow more and more, new government bonds are constantly being issued. This greater supply means that investors demand higher returns, especially now that inflation expectations are rising. This leads to rising interest rates on long-term bonds.
In the meantime, if the central bank keeps short-term interest rates low, a steeper yield curve will arise. This is characteristic of the problematic phenomenon of fiscal dominance. The Federal Reserve then loses control over interest rate policy, because keeping the national debt affordable becomes more important than combating inflation.
Trump’s tax plan worsens the situation
As if that weren’t enough, there may be a new impetus for debt. In July 2025, the “Big Beautiful Bill” was passed, a plan by Donald Trump that makes dozens of 2017 tax breaks permanent and adds new cuts.
According to the independent budget agency CBO, this law will cost between $2.4 and $3 trillion in additional deficits over the period 2025 to 2034. In a scenario in which even more temporary measures become permanent, this could rise to more than $5 trillion.
What does this mean for Bitcoin and gold?
With such high debts, governments have historically often turned to inflation as a way out. Printing money or allowing the currency to weaken reduces the real value of the debt. But at the same time this affects the purchasing power of citizens.
In such circumstances, investors resort to scarce and stable assets such as gold and Bitcoin (BTC). Gold has already risen by almost 70 percent in the past year, partly because countries such as China bought huge quantities of the precious metal in an attempt to reduce their dependence on the US dollar.
BTC is also climbing again, after a huge correction in the fourth quarter. In the past week, the Bitcoin price rose by 6.7 percent.
Source: https://newsbit.nl/amerikaanse-staatsschuld-bereikt-nieuw-record-wat-zijn-de-pijnlijke-gevolgen/
