The scale of US federal government debt has once again surpassed a historic milestone. Data released by the US Treasury on the 19th shows that the total US debt has for the first time exceeded 40 trillion dollars, almost 10 trillion more than last year’s US gross domestic product (GDP), meaning that every American shoulders about $116,000 (around RM470,700) in debt.
The unchecked growth of US debt not only exposes deep-seated structural problems in American public finances, but also exports risk globally via dollar hegemony, posing ongoing threats to global financial stability and the recovery of the world economy.
In recent years, even without major crises, the US debt has increased by more than 2 trillion dollars annually on average, with the growth rate of debt nearly twice that of the economy for a long time. The snowball effect of debt continues to intensify, and under the current fiscal framework there are no constraints to autonomously cool down or slow this trend.
The Biggest Threat to America’s Future Draws Near
Analysts point out that 40 trillion dollars is not just another number, but also a key milestone in the deterioration of US fiscal sustainability, marking the intensification of America’s structural crisis and the ongoing accumulation of multiple risks.
Firstly, persistent high leverage significantly weakens the fiscal resilience to risk. As total debt soars, the ratio of US government debt to GDP has remained at a high level for a long period. By the end of the first quarter of 2026, this figure is expected to reach nearly 123%, far above internationally recognized warning thresholds.
Former IMF chief economist and Harvard professor Kenneth Rogoff recently told the media that surging debt, rising interest rates, and political deadlock have eroded the resilience of the US economy—typical signs of a country heading toward a debt crisis.
Secondly, enormous interest payments squeeze public policy budgets, further aggravating fiscal imbalances. With current debt levels, annual interest payments on US debt have reached historic highs, significantly diverting public resources, and US public finances are gradually devolving into operating “solely to service debt.”
An article on the website of Fortune magazine points out that US government interest outlays in the first half of the 2026 fiscal year have reached $529 billion, equivalent to the total spending on defense and education, and the persistently rising costs of servicing debt greatly reduce the government’s flexible public spending.
Furthermore, years of disorderly borrowing are undermining market confidence, and the “risk-free asset” aura of US debt is fading. Relying on the dollar’s hegemony, US debt has long been a global safe-haven reserve asset. But ceaseless debt expansion is now making global investors doubt its long-term creditworthiness. Sovereign entities around the world are continually adjusting their foreign exchange reserves, cutting holdings in US debt and increasing holdings in gold and diversified assets. The global safe-haven premium for US debt keeps narrowing, and market vulnerability is rising significantly.
Unrestrained Debt Expansion Wreaks Havoc Worldwide
US debt is regarded as the anchor for global financial pricing and the core barometer of cross-border capital flows. The massive $40 trillion in US debt will export risk outward by pushing up financing costs, disturbing cross-border capital movement, and reducing market liquidity, triggering global, persistent, and chain negative shocks.
The vast supply of US debt lifts global risk-free interest rates and suppresses the momentum for worldwide recovery. To plug fiscal holes, the US keeps issuing new debt, and market concerns about the repayment of such massive obligations push up risk premiums, causing yields on long-term US bonds to rise. JPMorgan’s interest rate strategy team’s latest report believes the enormous supply of debt will continue to increase term premiums for bonds over the long term.
As the global benchmark for asset pricing, rising yields on US debt cause yields on other national sovereign bonds, dollar corporate bonds, and household loans to move up in tandem: emerging markets face much heavier pressure on foreign currency debt repayments, global corporate financing and investment costs go higher, and business expansion, cross-border investment, and consumer credit demand all weaken together.
Climbing long-term yields spawn a “siphon effect” for US dollar assets, heightening global capital and exchange rate fluctuations. Higher-yielding US debt attracts massive capital away from emerging markets and back into the US. According to Reuters and Bloomberg fund flow data, as US debt approached the $40 trillion mark and long-term yields oscillated upward, cross-border funds began shifting more frequently and sharply, further exacerbating the divergence between financial markets in developed and emerging economies.
The disorderly expansion of US debt also distorts bond trading structures, weakens market liquidity, and raises global systemic risk. The $40 trillion in debt causes supply-demand imbalances, resulting in a fundamental shift in holding structures: central banks, sovereign wealth funds, and other long-term investors are continually reducing their participation, while hedge funds and other short-term leveraged capital become the main buyers. US debt has changed from a “stabilizer” in global markets into an “amplifier” of volatility. If economic data, monetary policy, or geopolitical conditions change, leveraged investors can easily trigger panic selling, causing violent swings in yields and a sudden drying up of market liquidity.
The IMF’s latest Global Financial Stability Report warns that increased liquidity vulnerability in the US debt market amplifies cross-market risk resonance, making local financial turbulence much more likely to spread globally, and continuously undermines the self-healing ability of the global financial system.
The massive US debt has already become a source of global systemic risk. By relying on dollar hegemony, the US shifts the costs of its fiscal imbalance abroad, not only suppressing global economic recovery but also continually tearing at the fabric of the current international financial order. In the long run, the fragility and structural contradictions of the global financial system will continue to accumulate due to US fiscal risk.