US Debt Nears $40T as Rising Interest Costs Renew Fiscal Crisis Fears

• Rising US debt and higher Treasury yields have concerned investors around the globe.
• Wall Street Mav said inflation, not default, could be the primary tool for debt reduction.
• Federal debt has climbed to nearly $39.4T, while interest payments have reached $857B.

The debate over America’s debt burden is back in focus after Wall Street Mav argued that the US is heading toward an inflation-driven debt reduction rather than an outright default.

The comments come as the national debt approaches $40 trillion, Treasury yields remain high, and federal interest payments continue to climb.

Debt Burden Fuels Inflation Concerns

In a post shared on X, Wall Street Mav argued that the US government faces roughly $160 trillion in total obligations when combining nearly $40 trillion in national debt with an estimated $120 trillion in unfunded liabilities. 

With the US economy worth about $32 trillion annually, the combined figure is roughly five times the country’s GDP.

An accompanying presentation described two possible outcomes. One was an outright default, which Wall Street Mav dismissed as unlikely. The second, labelled the “installment plan,” argued that the government would continue meeting debt payments while gradually reducing the real value of those obligations through inflation.

The presentation compared the approach to the inflationary period of the 1970s, estimating that the dollar could lose about 75% of its purchasing power over the next decade. Under that scenario, a basket of goods costing $1,000 today could cost around $4,000 by the end of the period. 

Wall Street Mav also discussed how gold rose from roughly $35 to $850 during the same decade, while noting the argument was about preserving purchasing power rather than forecasting another 25-fold rally.

They said the Federal Reserve would likely end up monetizing debt over many years because traditional solutions would not be sufficient to manage liabilities of that scale.

Market Participants Offer Different Views

Not everyone agrees that the US is approaching a debt crisis. Market participant Christopher Kidwell argued that other nations also depend heavily on the US financial system and hold significant amounts of American debt, making a collapse of the US government highly unlikely.

Wall Street Mav responded that Treasury bondholders would still receive repayment, but warned that inflation could significantly reduce the purchasing power of those dollars over time.

Entrepreneur Saleh Almenawer proposed a different solution altogether. He argued that instead of relying on monetary expansion, the US could substantially revalue its official gold reserves. According to him, the country’s 8,133.5 tonnes of gold are still carried at the statutory price of $42 per ounce, while central banks globally hold around 36,470.7 tonnes. 

Borrowing Costs Continue to Rise

According to sources, the federal deficit has reached nearly $1.4 trillion during the first nine months of fiscal year 2026, already exceeding borrowing over the same period last year. Total US national debt now stands at approximately $39.4 trillion.

The Congressional Budget Office estimates net interest payments have climbed to $857 billion during the fiscal year, about 13% higher than a year earlier as both debt levels and long-term interest rates increased. The government is currently borrowing roughly $155 billion every month, or about $39 billion each week.

Meanwhile, spending continues to rise across major entitlement programs. Social Security outlays increased by $62 billion during the fiscal year, Medicare spending rose by $58 billion, and Medicaid spending climbed by $49 billion as the US population continues to age.

Bond Market Adds to Fiscal Pressure

Peter Schiff noted that the 10-year Treasury yield has reached 4.6% and said a move above 5% would mark the highest level since July 2007. He added that the comparison is more significant today because the US national debt has grown from less than $9 trillion in 2007 to nearly $40 trillion.

Market participant Derek Cameron said the federal government has already paid more than $1 trillion in interest since the fiscal year began in October, with nearly three months still remaining.

Bloomberg Intelligence Senior Commodity Strategist Mike McGlone offered a more measured view, noting that government debt remains relatively small compared with the overall value of the US stock market, with the debt-to-market-cap ratio sitting near its lowest level since 2007.

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