Fri, 04 Jul 2025

Fri, 04 Jul 2025 US debt is now $37trn – should we be worried?

President Trump's budget bill will add to the US debt pile but is there a limit to how much the rest of the world will lend Uncle Sam?

* The US debt has increased by at least $3 trillion (£2.2 trillion) to $37tn (£27tn) with Trump's tax-cutting budget bill.
* Critics, including Elon Musk and Ray Dalio, have expressed concerns about the scale and sustainability of US borrowing from the rest of the world.
* The growing debt pile has led to a weaker value of the dollar (down 10% against the pound and 15% against the euro) and higher interest rates demanded by investors.
* The yield curve has steepened, indicating increased doubts about the long-term sustainability of US borrowing.
* Ray Dalio estimates that the US will soon be spending $10tn a year in loan and interest repayments if current trends continue.
* Three potential outcomes have been identified: drastic reduction in government spending or taxes, central bank printing more money to buy up government debt, or a straightforward US default (can't pay won't pay).
* Despite the growing concerns, the dollar remains the world's benchmark asset and there are few alternatives to it, with many trying to reduce their dollar holdings.
* The future of the dollar and US government bonds is being discussed at high levels, including by the governor of the Bank of England.
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