The rapidly growing US national debt is causing increasing nervousness in the global financial sector and raising doubts about the fiscal policy course of the US government. Since 2015, the debt has nearly doubled from $18.2 trillion to about $36.6 trillion, which corresponds to 123% of gross domestic product.
Insights into the Debt Dynamics
Recent legislations like the “One Big Beautiful Bill” could further increase the debt by an additional $3 trillion by 2034. Interest payments for 2023 are estimated at $794 billion and could soon exceed $1 trillion annually.
The Consequences of Increasing Debt Burden
- Higher Credit Costs: Uncertainty about creditworthiness increases yield demands on US government bonds, raising financing costs.
- Restricted Maneuvering Space: High debt limits investments as rising interest rates constrain financial leeway.
- Creditworthiness: The downgrade of US credit by Moody’s in May 2025 is a wake-up call for credible deficit measures.
Impacts on European Investors
- Global Financial Flows: Yields on US bonds influence capital flows and investment decisions worldwide.
- Interest Rate Developments: Higher US interest rates could trigger rising borrowing costs internationally.
- Risk Aversion: Distrust in US debt securities may lead to more volatility in international markets.
In summary, the growing US debt shows that it has not only national but also international consequences, which could directly impact financial markets and investors in Europe.