Bond Market Breakdown: Rising Rates Threaten America’s Future

The U.S. government’s interest payments on its debt have surpassed a staggering $1 trillion annually. That figure is larger than the defense budget and more than the combined costs of Medicaid, disability insurance, and food stamps. This development marks a turning point in the nation’s fiscal stability. And raises major concerns for investors, policymakers, and everyday Americans alike.

Every time the federal government runs a budget deficit, it fills the gap by auctioning bonds on the open market. To entice investors to buy these bonds, the government must offer interest, more so when doubts grow about its ability to repay. As debt accumulates, servicing past debt becomes costlier. And sets off a dangerous chain reaction where interest payments compound into future debt. This creates a scenario that some economists now warn may lead to a full-blown economic crisis.