A screen displays the U.S. national debt surpassing 40 trillion U.S. dollars, in New York, the United States. (Xinhua/Zhang Fengguo)

* The total debt of the U.S. federal government once again hit a historic high, surpassing 40 trillion U.S. dollars on Wednesday.

* In the 21st century, the federal debt has been turned into a routine financing tool, launching a debt snowball.

* The IMF's latest Global Financial Stability Report warns that rising fragility in the U.S. Treasury market could amplify cross-market risk spillovers.

BEIJING, Aug. 20 (Xinhua) -- The total debt of the U.S. federal government once again hit a historic high, surpassing 40 trillion U.S. dollars on Wednesday.

The latest U.S. Department of the Treasury data showed that the fresh debt record of 40.047 trillion dollars is nearly 10 trillion dollars more than last year's gross domestic product (GDP), or approximately 116,480 dollars in federal debt per American.

As the United States is the world's largest sovereign debt market, its unchecked debt growth not only exposes deep structural fiscal problems at home, but also exports risks through the dollar-based financial system, posing a sustained threat to global financial stability and economic recovery.

How did U.S. debt soar to this record high? What is the fiscal predicament? And how does this situation push up global financial risks?

DEBT SNOWBALL

"The scale of U.S. borrowing has expanded exponentially and to a level almost beyond comprehension over two and a half centuries," said a Newsweek online article.

The U.S. national debt on the Treasury Department's records started from a modest 71 million dollars in the late 18th century, more than a decade after the nation's independence in 1776.

It reached the milestone of 1 trillion dollars in about 200 years, and 10 trillion dollars in the next about 27 years. After that, the U.S. debt swelled to 30 trillion dollars in just 14 years, and to over 40 trillion dollars in the four years since.

People walk past the U.S. Capitol building in Washington, D.C., the United States, Jan. 19, 2025. (Xinhua/Wu Xiaoling)

History reveals an accelerating pace of U.S. debt growth over the past half a century.

In the 20th century, national debt became a key tool of federal fiscal policy and a critical instrument for responding to major crises. And in 1981, under the administration of President Ronald Reagan, it crossed the trillion-dollar mark.

In the 21st century, the federal debt has been turned into a routine financing tool, launching a debt snowball.

In recent years, despite the absence of any major crisis or disruption, the annual U.S. debt increase has kept a pace of more than 2 trillion dollars, twice that of economic expansion. It shows an intensifying snowballing effect, under a fiscal framework yet without automatic brakes to slow this momentum.

FISCAL WOES

"The greatest threat to our future is hidden in plain sight," warned a recent commentary on Fox News. It pointed out that the swelling federal debt is the biggest hidden danger -- with debt rising year after year, Washington has yet to offer any substantive solutions.

The 40 trillion-dollar milestone is not just a number; it marks a significant deterioration in U.S. fiscal sustainability, signaling deepening structural fiscal crises and the continued accumulation of multiple risks.

First, persistently high debt leverage has weakened fiscal resilience. As total debt soars, the U.S. government debt-to-GDP ratio remains elevated, reaching 123 percent by the end of the first quarter of 2026, well above the internationally recognized 60 percent warning level.

The mounting debt burden continues to crowd out available fiscal resources, leaving the government with increasingly limited fiscal flexibility to support industries, invest in public welfare, and fund infrastructure development.

Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund (IMF), said in a recent interview with Japan's Asahi Shimbun that surging debt, rising interest rates and political gridlock have eroded the resilience of the U.S. economy, all of which are typical warning signs of a country heading toward a debt crisis.

A customer shops at a store in New York, the United States, on Aug. 12, 2026. (Xinhua/Zhang Fengguo)

Second, massive interest payments are squeezing public budgets and worsening fiscal imbalances. At current debt levels, annual interest costs have hit record highs, diverting huge amounts of public funds and gradually leaving the U.S. fiscal system focused largely on servicing its own debt.

According to Fortune magazine, U.S. interest payments in the first half of fiscal 2026 totaled 529 billion dollars, or over 88 billion dollars per month, equivalent to combined spending on defense and education. This leaves the government far less room to allocate discretionary public spending.

Third, prolonged and disorderly debt issuance is eroding market confidence, dimming the traditional "risk-free" aura of U.S. Treasuries. Backed by dollar hegemony, U.S. debt has long been a core global safe-haven asset. But endless borrowing has raised doubts among global investors about its long-term creditworthiness.

Sovereign institutions around the world have continued to adjust their foreign exchange reserve allocations, reducing their holdings of U.S. Treasuries while increasing allocations to gold and other diversified assets. As a result, the global safe-haven premium of U.S. Treasuries has continued to narrow, significantly increasing market vulnerability.

Data from the European Central Bank show that by the end of 2025, the share of U.S. Treasuries in global official reserve assets had fallen for two consecutive years, dropping 4 percentage points from the end of 2023.

GLOBAL COST

As the anchor for global financial pricing and a key barometer of cross-border capital flows, the 40 trillion U.S. debt burden could transmit risks globally through channels including higher financing costs, disruptions to cross-border capital movements and reduced market liquidity, triggering prolonged and widespread negative spillover effects.

This photo taken on Jan. 20, 2023 shows the U.S. Department of the Treasury in Washington, D.C., the United States. (Xinhua/Liu Jie)

Massive U.S. debt supply raises global risk-free rates, stifling the recovery. With Washington continuing to borrow heavily to cover fiscal deficits, growing concerns over the sustainability of its massive debt burden are pushing up risk premiums and driving long-term U.S. Treasury yields steadily higher.

As the benchmark for global asset pricing, higher U.S. Treasury yields drive up borrowing costs for sovereign bonds, corporate dollar debt, and consumer credit worldwide. Emerging markets face heavier foreign-currency debt burdens, while global corporate investment and financing costs rise, dampening industrial expansion, cross-border investment and consumer credit demand.

Rising long-term yields create a "suction effect" for dollar assets, intensifying global capital and currency volatility. High-yield U.S. Treasuries continue to attract global funds back to the United States, causing large-scale capital outflows from emerging market equity and bond markets.

Data from Reuters and Bloomberg show that, as U.S. debt approaches the 40 trillion-dollar mark, long-term Treasury yields have fluctuated upward, prompting large-scale and frequent shifts in cross-border capital flows and further widening the divergence between financial markets in developed economies and emerging markets.

Disorderly debt expansion also distorts bond market structures, weakens liquidity, and heightens global systemic risks. The U.S. Treasury market, once a cornerstone of global financial stability, is now experiencing supply-demand imbalances.

Its ownership structure has fundamentally shifted: long-term allocators like foreign central banks and sovereign wealth funds are consistently reducing their holdings, while short-term leveraged players such as hedge funds are stepping in as major buyers.

As a result, U.S. Treasuries, long regarded as a global stabilizer, are increasingly becoming a source of market volatility. Any shift in economic data, monetary policy or geopolitical conditions could trigger concentrated selling, leading to sharp moves in yields and sudden liquidity freezes.

The IMF's latest Global Financial Stability Report warns that rising fragility in the U.S. Treasury market could amplify cross-market risk spillovers, turning localized financial shocks into global disruptions and steadily weakening the self-correcting capacity of the international financial system.

International observers broadly agree that the 40 trillion-dollar U.S. debt burden is not merely a fiscal issue for the United States alone; it has become a source of global systemic risks.

The United States is using the dollar's dominant position to externalize the costs of its fiscal imbalances, not only weighing on the global economic recovery but also continuing to undermine the existing international financial order.

Over the long term, vulnerabilities in the global financial system and underlying structural imbalances will only continue to accumulate. ■