LAST week, the US national debt hit over $40 trillion causing panic amongst central banks, and economists across the world.
It is not just the size of the debt but the breakneck speed of the US debt that has more than doubled in size in the past ten years.
It took nearly 200 years for the US national debt to reach the $1 trillion mark.
The US national debt hit the $1 trillion mark in 1981 and was considered to be such a momentous wake-up call that Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said: ‘At that time, President (Ronald) Reagan told the nation in a televised address, “If we as a nation needed a warning, let that be it.”’
She added: ‘Jumping to America’s 250th year, we are spending more than that just on interest repayments on our debt.’
In 2016, the start of Trump’s first term as president, the US national debt was just under $20 trillion.
In just ten years it has ballooned to over twice that amount and is increasing by around $90,000 every second, or $7.8 billion a day, according to the Congress Joint Economic Committee.
The interest rates charged by the speculators and hedge funds who have bought up the majority of the US debt are huge as they demand higher returns for what is increasingly seen as a risky investment.
Economist Mohamed A El-Erian, a professor at the Wharton School, says interest payments on the US debt are now 15% higher than the same time last year and have reached the level of almost 20% of the money raised in taxes.
This is ‘larger than defence’ spending, he added.
Compounding the crisis for US capitalism is the emergence of the so-called AI ‘hyper-scalers’. These are the giant AI companies that are competing with the US government for investors’ cash to fund their massive speculative expansion of the artificial intelligence bubble.
Last week, Trump instructed the US Treasury Secretary Scott Bessent to try and sort out the crisis of rocketing interest repayments and stop the bond vigilantes from dumping by buying up the US national debt.
Bessent employed the simple tactic of the US government buying up its own debt with the US treasury doubling its purchase of 30-year bonds.
This attempt to push up bond prices and therefore lowering the interest rate, and convince the bond vigilantes that Trump was determined to deal with the crisis, backfired.
Despite an initial drop in interest rates, they quickly bounced back forcing Bessent to promise to buy even more.
In the past, the US has been afforded a ‘privileged position’ as the world’s most powerful capitalist nation, with the US dollar reigning supreme. This allowed the US to run up stratospheric debt funded by other countries, banks and financial institutions, buying up its debt as a ‘safe haven’ for their currencies.
Nations have been dumping their US bonds and today the hedge funds and bond vigilantes hold the majority of the US debt.
This financed US imperialist wars across the globe and allowed Trump to carry out massive tax cuts to the rich and wealthy corporations, dishing out $4 trillion in tax cuts and funding for the failed war against Iran.
Today, the US economy is crashing under the weight of its massive national debt, a crash that will bring down the economies of the UK, Europe and the entire capitalist world, with the ruling class preparing to inflict the cost of its crisis on the working class.
The working class in the US, UK and the world will be made to pay through the most savage austerity cuts as the capitalist class strives to escape bankruptcy by loading it on the backs of workers.
The working class has the power to resolve this crisis. It must force the trade unions to stop sitting on the sidelines, while capitalism crashes and burns, and must call general strikes to bring down their capitalist governments and go forward to workers governments and socialism, putting an end to capitalism with the victory of the world socialist revolution!
