Whereas the abnormal growth of U.S. government debt is a real issue, not everybody who is concerned with it is in good faith. Wall Street and City of London powers are pushing threats to destabilize Donald Trump if he does not slash U.S. government spending immediately, even though the vast debt problem the United States now confronts is largely the doing of the past five years by the Federal Reserve and the Biden Administration U.S. Treasury.
From a reality standpoint, a national debt is a source of concern if its growth rate is higher than the physical economic growth. National debt in the form of credit for growth, however, is a blessing, as Alexander Hamilton explained. That is not the nature of the U.S. national debt currently, and is therefore a source of concern for a solution, for all patriots.
The U.S. Treasury market is the world’s largest financial market, the world’s largest locus of derivatives speculation, and tens of thousands of hedge funds now effectively are able to “control” it. U.S. federal debt has grown by 50% in five years. The “publicly held” U.S. federal debt (i.e., the federal debt not held by Social Security and Medicare trust funds) has grown by 60% in five years. Federal spending grew as much in one year, from FY 2023 to 2024 (by $617 billion) as U.S. federal tax revenue grew in ten years from FY2015 to 2024 (by $610 billion). U.S. spending has been 25-30% of GDP over 2020-24 compared to its 50-year average of 21% of GDP.
All this, with no manufacturing boom and no significant new infrastructure replacement—including extremely little new housing having been built.
Tens of thousands of hedge funds swarm the Treasury market buying collateral for speculations. The Federal Reserve Bank provides the liquidity for this in the forms of “excess bank reserves” and “liquidity loans.” Remember the “Repo crisis” of September 2019: The Fed provided the interbank market with up to hundreds of billions in loans every night for several weeks, then launched QE5 in October, and then—in a new partnership with the Treasury which central bankers called “regime change”—provided many trillions in excess reserves to the banks until 2022.
