US Debt Crisis Fuels Record Central Bank Gold Buying

The US debt crisis has reached a critical juncture, where the country is borrowing new capital primarily to cover interest on existing debt rather than funding productive activities.

This self-reinforcing dynamic is causing concern among economists and investors as it introduces a compounding feedback loop with no straightforward exit. The US national debt has breached $40 trillion, with net interest payments approaching $1.1 trillion annually, representing around 14% of total federal outlays.

The critical context is that the last time 30-year Treasury yields hovered around 5% was in 2007, when the total national debt stood near $9 trillion. Applying a comparable interest rate to today's larger debt base produces an interest burden that is not incrementally more difficult to manage but categorically different in its fiscal consequences.

Ray Dalio's long-term debt cycle framework identifies late-stage monetary systems by several key indicators, including accelerating debt monetization and declining global reserve currency dominance. The US dollar's share of global foreign exchange reserves has declined from 71% in 2000 to below 58% today, a trend that has not reversed in a quarter century.