On September 18, the Federal Reserve made a significant move by announcing its first interest rate cut since March 2020, officially marking a transition in its monetary policy from a tightening cycle to one aimed at promoting economic growthThis decision comes amidst a backdrop of staggering national debt that continues to challenge the viability of the American economic landscape.

Since the 1980s, the scale of U.Sdebt has surged dramaticallyIn 1990, the total federal debt stood at approximately $3.2 trillion, which ballooned to around $5.62 trillion by 2000. Fast forward a decade to 2010, and the debt had reached almost $13.56 trillion; by 2020, it had nearly doubled to approximately $27.74 trillionMost recently, as of 2023, the U.Sgovernment debt surpassed $34 trillion—and projections suggest it could exceed $35 trillion by July 2024, further cementing its status as a debt-riddled nation

While the Fed's decision to lower interest rates may alleviate some immediate repayment pressures, the relentless growth of U.Sdebt looms ominously over the global economy.

A report published on September 12 by the U.STreasury revealed that the federal government has paid over $1 trillion in interest on its $35.3 trillion debt this year aloneThe rising cost of servicing this debt aligns closely with a significant increase in the federal deficit, which ballooned by 24% year-on-year to reach $1.9 trillion in the eleven months leading up to AugustThe fiscal year 2020 saw a peak federal deficit of $3.13 trillion, which dropped in the subsequent years but experienced a resurgence in 2023, escalating by approximately $320 billion—a 23% increase from the previous fiscal yearThis paradoxical situation arises from reduced fiscal revenues due to various tax cuts coupled with increased government spending aimed at stimulating economic growth, creating a vicious cycle reliant on further borrowing.

The fluctuations in national debt are unmistakably tied to the government’s financial practices and the broader economic growth trends

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Historically, periods of significant debt accumulation have coincided with economic stagnationFor instance, both the 2008 financial downturn and the COVID-19 pandemic triggered negative growth indicators in the economy while the government debt soared.

According to the theory of budget constraints, when economic growth outpaces the debt interest rate, the economy can effectively digest the ensuing debt growthEven if the absolute amount of debt increases, the concurrent expansion of the economy could neutralize the adverse effects of debt accumulation, theoretically reducing the relative debt burdenHowever, U.Seconomic growth generally hovers around 2%, which stands in stark contrast to persistent debt interest rates above 5%. The reality is that the U.Seconomy's growth statistics include capital appreciation in non-productive sectors like finance, failing to adequately reflect the government’s actual material production capabilities.

The foundation of the U.S

debt deficit lies in its reliance on the dollar's position as the world's dominant currencySince the 1980s, the Western world has endorsed a globalization agenda centered on U.Sinterests, creating an intricate web of international debt cyclesBy issuing dollars to purchase goods and resources from around the globe, the U.Sgenerates substantial trade deficitsNations running surpluses, after receiving these dollars, often find themselves unable to utilize this liquidity domestically and thus deposit these funds in U.Sbanks, or invest heavily in U.Sdebt securities and other financial instruments, effectively recycling the dollars back to the U.SSince 2010, publicly held debt has consistently surpassed 60% of the U.SGross Domestic Product (GDP), reflecting a remarkable resilience in avoiding a debt crisis, which can largely be attributed to the international circulation afforded by the dollar's status

Moreover, there are currently no viable alternatives to U.STreasury bonds in the global financial market, which further entrenches reliance on this debt financing model.

The U.Sfinancial system has played a pivotal role in redistributing the debt burden through various mechanisms, including interest and exchange rate adjustments aimed at managing the dollar's valueFollowing the onset of the pandemic, the Federal Reserve implemented quantitative easing measures that inadvertently fueled inflationIn the aftermath, to battle rising inflation, the Fed adopted multiple interest rate hikes, which bolstered the dollar's strength, devaluing currencies of other nations—especially those of developing economiesThis devaluation imposes higher debt repayment costs on these countries, leading to a significant influx of their dollar-denominated assets back to the U.SAfter over four years of interest rate hikes, this policy is credited with restoring economic equilibrium and alleviating inflationary pressures

Now, with the Fed initiating its first rate cut in more than four years, the forthcoming depreciation of the dollar is anticipated to generate imported inflation for other countries and concurrently diminish the value of their dollar reserves and U.STreasury holdings.

At a deeper level, the ongoing expansion of U.Sdebt may also be attributable to the dysfunction inherent in the country's two-party political systemThere exists a troubling prevalence of political maneuvering prioritizing party interests over national welfare, leading to excessive short-term gains that overdraw future economic potentialThis irresponsible fiscal policy has increasingly raised the debt ceiling while remaining blind to the deteriorating state of governance and the rising risks of debt defaults.

In conclusion, the enormous national debt problem facing the United States is a multifaceted conundrum exposing profound issues within its economic and political frameworks