Former Treasury Official Warns Americans Need To Worry About Not Just About Soaring US Debt, But Also About Who Is Buying It: Report
Geng Ngarmboonanant, managing director at JPMorgan Chase & Co., and former deputy chief of staff to former Treasury Secretary Janet Yellen, on Friday warned that Americans need to worry about the changing profile of U.S. debt holders.
Changing Profile Of Debt Holders
In an opinion piece for the New York Times, Ngarmboonanant stated that the changing profile of U.S. debt holders has contributed to higher and more volatile interest rates. This trend is affecting mortgage, student loan, and other borrowing costs, raising concerns about the stability of the country’s financial system.
The former Treasury official highlights that foreign governments, once major buyers of U.S. debt, now hold less than 15% of the Treasury market. This is a significant drop from over 40% in the early 2010s. Meanwhile, the Federal Reserve has reduced its Treasury holdings by approximately $1.5 trillion in recent years.
Private investors have filled the gap, but their profit-driven approach has led to increased interest rates. Hedge funds have also doubled their presence in the U.S. debt market, contributing to market volatility.
Changing Fiscal Priorities
Ngarmboonanant also added that interest payments on the national debt have now surpassed defense spending.
He added that the U.S. is now paying more in interest on its national debt, which exceeds $38 trillion, than on national defense, marking a significant change in fiscal priorities.
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Why This Is Important
The U.S. national debt has been accelerating at an unprecedented pace, surpassing $38 trillion amid a federal government shutdown, according to Treasury data. This rapid increase has raised alarms about the nation’s financial stability. Michael Peterson, CEO of the Peter G. Peterson Foundation, emphasized the alarming speed of debt accumulation.
Economists, including Richard Haass from the Council on Foreign Relations, have warned that the $38 trillion debt poses a significant threat to national security and global standing. Haass outlined scenarios where rising debt could lead to a “national security crisis,” affecting resource allocation and U.S. leverage abroad, as noted in an interview.
Despite these concerns, bond vigilantes have not targeted the U.S. debt, focusing instead on Japan, as reported in a recent analysis. Long-term yields remain under control, even with persistent inflation and heavy issuance, highlighting the complex dynamics of the global bond market.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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