US $37 Trillion Debt Cause Market To Fall ?
Celebration Time !
The “good” news is US government’s gross national debt has just surpassed $37 trillion.
It is a record breaking number that (a) highlights accelerating debt on America’s balance sheet and (b) increased cost pressures on taxpayers.
The $37 trillion update can be found in US Treasury Department latest report that logs the nation’s daily finances; released on Tue, 12 Aug 2025.
Root Causes.
US national debt reached this level, 5 years earlier than US Congressional Budget Office’s January 2020 forecast of “after fiscal year 2030”.
Truth be told, US debt has grown faster than expected due to the multi-year Covid-19 pandemic, that began in 2020 and shut down much of US economy very quickly.
Under both presidents Trump & Biden, federal government borrowed heavily, to stabilize the national economy and support a recovery.
In the process, it exacerbated an already dire situation with US national debt.
Now, with Trump signing the Republican’s tax cut and spending law on 04 Jul 2025 ‘ironically’, more government spendings will be underway.
According to US Congressional Budget Office, Trump’s tax bill will add $4.1 trillion to the national debt over the next 10 years; long after Trump is no longer in the oval office.
Experts’ Opinions.
(1) Peter G. Peterson Foundation, Chair & CEO, Michael Peterson has said the government borrowings will:
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Exert upward pressure on interest rates.
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Add costs for everyone.
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Reduce private sector investment.
Within the federal budget,
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The debt will crowd out important priorities.
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Creates a damaging cycle of more borrowing, more interest costs, and even more borrowing.
Debt Acceleration Rate.
Peterson also pointed out how the trillion-dollar “debt” milestones are “piling up at a rapid rate”.
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US hit the $34 trillion debt in January 2024.
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$35 trillion by July 2024.
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$36 trillion by November 2024.
As observed, US is adding $1 trillion more to the national debt every 5 months, that’s more than twice as fast as the average rate over the last 25 years.
Is Trump’s verbal abuse of Fed chair, to cut interest rates politically motivated ? A lower interest rate means lower bond payout and a deceleration of US national debt growth rate. Or is inflation truly under control ? Who is really looking out for Americans - Trump or Powell?
Bleak Warning.
(2) The Joint Economic Committee (a standing joint committee of US Congress) bleak estimate is that based on the (current) average daily rate of growth, the addition of another trillion dollar to US national debt would be reached in approximately 173 days.
(3) According to Brookings Institution (Economic Studies), Senior fellow, Wendy Edenberg:
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US Congress has a major role in setting in motion — spending and revenue policy.
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The result of Republicans’ tax law “means the incumbent will be borrowing a lot over the course of 2026 & 2027 and borrowings is just going to keep going.
(4) US Government Accountability Office outlines some of the impacts of rising government debt on Americans.
This will include (a) higher borrowing costs (eg. mortgages and cars), (b) lower wages from businesses having less money available to invest, and more expensive goods and services.
(5) As nonpartisan, nonprofit organization - Committee for a Responsible Federal Budget, President, Maya MacGuineas remarked:
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Hopefully this milestone is enough to wake up policymakers to the reality that something needs to be done and quickly.
Treasury Dept to the rescue!
From June 2025 to August 2025 alone, US Treasury department under Scott Bessent has held multiple auctions of Treasury bonds and notes as part of its regular schedule to raise funds for government operations.
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In June 2025, one of the auctions was for 20-year bonds with an offering amount of $13 billion held on 16 Jun 2025.
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In August 2025, auctions have included 3-year notes, 10-year notes, 30-year bonds, and various Treasury bills (like 6-week, 13-week, and 26-week bills) with auction dates spanning early to mid-August.
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Market appetite for short- to medium-term notes has been reported as generally strong, indicating successful fundraising efforts.
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Demand for long-term bonds (20-year or 30-year) encountered mixed demand with somewhat cautious appetite, partly reflecting fiscal concerns.
The continuous auctioning of these notes and bonds is part of Treasury Dept’s strategy to manage short- and long-term debt under Trump administration.
This regular issuance activity is critical for maintaining government liquidity and funding operations amid ongoing fiscal challenges.
Is Trump’s verbal abuse of Fed chair, to cut interest rates politically motivated ?
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Afterall, a lower interest rate means lower bond yield, smaller payout and deceleration of US national debt growth rate.
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Is US inflation truly under control ?
Who is really looking out for Americans - Trump or Powell?
National Debt Insidious Effect on US Market.
The ballooning US national debt can potentially cripple US stock market through several interconnected mechanisms:
(1) Higher borrowing costs and Interest rates:
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As US government issues more debt to finance its obligations, Treasury yields need to rise to attract buyers.
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Rising Treasury yields push up overall interest rates in the economy, including borrowing costs for companies and consumers.
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Higher interest rates also increase business costs and could compress corporate profit margins, leading to lower stock valuations.
(2) Crowding out private investment:
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Large government borrowing can "crowd out" private sector investment as investors may prefer the safety of government bonds over equities during uncertainty.
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As a result, this reduces capital available to companies for growth and expansion, restraining economic growth and investor appetite for stocks.
(3) Increased risk perception and volatility:
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Burgeoning national debt and related fiscal risks (eg. debt ceiling battles or further credit rating downgrades) increases market uncertainty and volatility.
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Investors, wary of default risk or fiscal instability, may reduce stock holdings or favour “safer” assets, driving down stock prices in the process.
(4) Recession risk.
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Persistent high debt levels and rising interest costs can slow economic growth and possibly trigger recessions.
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Economic downturns generally lead to weaker corporate earnings and lower stock prices.
Other Watchout items.
Apart from abovementioned risks, investors also should weigh factors like:
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Economic growth strength.
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Corporate earnings.
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Monetary policy.
Ultimately, overall impact of surging US national debt is a heightened risk environment that could (1) dampen stock market returns and (2) increase volatility over the medium to longer term.
Is it even possible that Trump administration is unaware of the repercussions of a burgeoning national debt? Surely there must be some financial expertise in the Trump administration to advise the him, no ?
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Do you think Trump’s demand for interest cut is because US inflation is under control?
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Do you think US national debt will hit $38 or $39 trillion by year end, affecting US market ?
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