The Most Boring Topic Imaginable——Soon To Have Everyone’s Full Attention: Who Understands the National Debt?
By James and Michael Hall — authors of the popular Audible book The Sword of Damocles: Our Nuclear Age.
jameshall042999@gmail.com
If you don’t understand the “National Debt,” you will need to—and soon.
Remember this number: $38 trillion. If you spent $1 million every single day since the birth of Christ, you still wouldn’t reach $38 trillion today. You’d only be at about $730 billion.
That’s how far beyond imagination $38 trillion truly is.
The current gross US National Debt stands at $38.0–38.09 trillion. Every American’s share is about $111,000 per person, or $288,000 per household. (You could give every man, woman, and child in the country a luxury car or a year’s college tuition at a private university for that amount of money.) In just five years, the debt has grown by nearly $11 trillion. In 2025, the debt has been climbing at $6 billion every single day—like a runaway train with no brakes. At this pace, analysts project the debt will reach $39 trillion by spring 2026.
To say the situation is out of control is an understatement. It is like having a personal credit card balance beyond management, with interest charges climbing every month and leaving little cash for necessities. But unlike an individual with debt, the government has no way out. It cannot die. It cannot declare bankruptcy. It cannot simply walk away.
Simply put, the national debt is the total amount of money the US government owes. It has two major parts.
The first is Public Debt—about $30.6 trillion. These are US Treasury securities sold to outside investors. Anyone can buy them. Most commonly they are purchased by banks, pension funds, mutual funds, insurance companies, households, and even the Federal Reserve. Foreign investors also buy Treasuries, including foreign governments’ central banks and private institutions.
The second category is Intragovernmental Debt. This is money the government effectively owes itself. A prime example is the Social Security Trust Fund, which holds Treasury IOUs. Social Security collects payroll taxes and uses them to pay current benefits. Any surplus is deposited into the Trust Fund, which the government then borrows to finance “other spending,” issuing Treasury IOUs in return. Probably not the most fiscally responsible concept!
These IOUs are special-issue Treasury securities—legally binding promises to repay the borrowed funds with interest. Since 2021, Social Security has already begun redeeming these securities as benefit payments have exceeded payroll tax revenues. This trend is expected to accelerate in the coming years as retirements rise and the number of younger taxpayers declines. Policies that restrict immigration can further reduce the inflow of payroll taxes from working-age generations. As pressures on Social Security and Medicare intensify, the government will be required to cash in more of these securities. That means not only covering the growing interest but also finding additional revenue, whether by raising taxes, cutting spending, or borrowing even more.
By 2050, if no reforms are enacted, the Social Security Trust Fund will be depleted and payroll taxes will only be sufficient to pay about 75–80% of scheduled benefits—forcing retirees to absorb benefit cuts of up to one-quarter. So yes, the system looks solvent on paper because of those IOUs, but they are not cash sitting in a vault—they are promises. If the government struggles to repay them, Social Security could face shortfalls unless Congress acts.
Now, who owns the debt? This question is deceptive, because the government itself creates the debt by selling securities and paying interest back. People like us purchase those securities, and on paper we are said to “own the debt.” In reality, about two-thirds of the public debt is held inside the United States by domestic investors and institutions.
The remaining one-third—roughly $8 to $8.5 trillion—is held abroad. The largest foreign holders are Japan and China, along with other governments and private investors. About half of foreign holdings are official (central banks and governments), and half are private.
When people hear that Japan and China are among the largest foreign holders of US debt, it can sound alarming. In reality, their holdings are the natural result of decades of trade and financial strategy. Both nations have long exported far more to the United States than they import. That leaves them with large amounts of US dollars, and the safest, most liquid place to invest those dollars is in US Treasury securities. By buying Treasuries, they not only earn a secure return but also help keep their own currencies weaker against the dollar, which makes their exports more competitive in American markets.
Japan, with its long-standing trade surplus and conservative financial culture, has consistently invested in Treasuries, often holding around a trillion dollars’ worth. China, during its rapid industrial rise in the 2000s, built up foreign exchange reserves that peaked at over $4 trillion, much of which was parked in Treasuries. Though China has reduced its holdings in recent years, both countries remain major investors.
The important point is that these holdings are not about “owning America.” They are about managing other nations’ economies while relying on the stability of US financial markets. For the United States, this foreign demand helps keep borrowing costs lower and underscores the unique role of the dollar and Treasuries as global safe havens. The lesson for donors and the public is that foreign ownership reflects confidence in America’s creditworthiness and central place in world trade—though it also reminds us that sustaining that confidence is vital for the future.
As we have explained, US Treasuries are essentially IOUs from the federal government. When the government needs money, it borrows by selling Treasury securities. Investors—whether banks, pension funds, households, or foreign governments—buy these securities. In return, the government promises repayment with interest. Think of it like this:
Treasury bills are short-term loans (a few weeks to a year).
Treasury notes are medium-term (2 to 10 years).
Treasury bonds are long-term (20 to 30 years).
All are considered extremely safe investments because they are backed by the “full faith and credit” of the United States. The government has never defaulted—it always pays back what it owes.
Foreign investors are important, but they are not the whole story. US Treasuries are considered among the safest investments in the world. They are liquid (easy to buy and sell) and serve as a global reserve asset. That is why demand has remained strong even as debt has grown.
But rising debt has consequences. Higher interest costs are a major concern. As debt grows, more of the federal budget goes to paying interest instead of funding programs. Sensitivity to interest rates is also a factor: if rates spike, borrowing costs rise sharply. Then there is the risk of confidence. If global investors suddenly lost faith in US Treasuries, borrowing costs could soar, worsening deficits and forcing difficult policy choices.
The national debt did not appear overnight—it is the product of decades of history and policy decisions. A turning point came in the 1970s, when the United States left the gold standard. Before then, every dollar was backed by gold reserves. Afterward, the dollar became a fiat currency, backed only by the government’s “full faith and credit.”
My grandfather, John Robert Hall, faithfully served fifty years as president of a regional National Bank. At that time, he warned my father: “This will be the end. You may not live to see the consequences, but your son will.” Well, I am that son—and the consequences are now ours to face.
Modern historians tell us that moving to fiat money gave America extraordinary flexibility. It meant the government could issue debt freely to meet challenges without being constrained by gold supplies. That flexibility became the common denominator behind every surge of borrowing that followed.
Long-term historical perspective shows that printing fiat money has often carried hidden dangers. France learned this lesson the hard way during the Revolution, when the government issued “assignats”—paper notes backed by confiscated church lands. At first they seemed a clever solution to fiscal crisis, but repeated over-issuance quickly eroded confidence. By 1793, assignats had lost nearly all value, farmers refused them, and the government resorted to draconian penalties to force their use. The collapse of the currency deepened social unrest and left the economy in chaos. It stands as a reminder that while fiat money grants governments remarkable flexibility, history warns that unchecked expansion can just as easily destroy trust and stability.
It is noteworthy to compare fiat money with currency backed by gold or silver, or even coins containing physical precious metals. A striking example comes from history. Although the Western Roman Empire traditionally fell in 476 CE, Roman coins from that era were still being accepted as currency as late as the 1600s in parts of the world.
With fiat money in place, our government was able to respond to crises and ambitions alike. The Cold War, Space Race, and Vietnam War demanded vast spending. Later, Middle East conflicts, 9/11 security measures, Hurricane Katrina relief, the 2008 financial crisis, and the COVID-19 pandemic all required emergency borrowing. Each event added layers of debt, building the more than $30 trillion headline figure we see today.
This story is both reassuring and cautionary. On one hand, fiat money allowed America to meet extraordinary challenges—from defending freedom abroad to stabilizing the economy at home. On the other hand, it removed natural limits, making it easier for debt to accumulate year after year. The lesson for donors and the public is clear. Our debt reflects both the strength of America’s institutions and the risks of unchecked borrowing. Sustaining confidence in US Treasuries and nurturing economic growth are what will keep this debt manageable for the future. This at any rate is the theory.
Debt is not new. The United States has faced large debts before, and each era helps us understand today’s challenges. After the Civil War, the debt soared from just $65 million to $2.7 billion—a staggering increase that tested the young nation’s financial credibility. In the 1940s, World War II pushed debt to more than 100% of GDP—the highest level in American history.
(Gross Domestic Product, or GDP, is the total value of everything a nation produces in a year. Think of it as the nation’s economic “scorecard.” It adds up all the goods and services made and sold—cars, food, healthcare, software, construction, you name it. There are three main ways to picture it: production side, spending side, and income side. All three add up to the same thing which is the size of the economy.)
Confidence was maintained because investors believed in the country’s strength, and rapid postwar growth helped reduce the burden. In the 1980s and 1990s, debt tripled again—driven by tax cuts, defense spending, and slower revenue growth. More recently, the 2008 financial crisis and the COVID-19 pandemic added trillions in emergency borrowing, echoing earlier wartime surges but without the same post-crisis reductions.
What makes today’s debt different is its cumulative nature. Past spikes were tied to single extraordinary events—wars or crises—followed by periods of repayment or growth. Today’s $30+ trillion debt reflects decades of structural deficits layered on top of repeated emergencies. Like the Civil War and WWII, the debt is historically large, but unlike those moments, it is not tied to one defining event. Instead, it is the product of long-term fiscal imbalance. That makes the challenge more complex to sustain investor confidence, manage rising interest costs, and find ways to grow the economy fast enough to keep the debt manageable.
Throughout history, many nations have wrestled with debt surges much like the United States today. In modern times, Japan has carried debt exceeding 250% of GDP for decades, yet avoided crisis because most of it is held domestically and investor confidence remains strong. By contrast, Greece in the 2010s saw debt climb above 170% of GDP, triggering a collapse in confidence, painful austerity, and international bailouts. Earlier examples include Britain during the Napoleonic Wars, when debt soared past 200% of GDP but was gradually reduced through a century of industrial growth, and post–World War II Europe, where reconstruction and expansion helped nations manage debts that had reached wartime highs.
Even in ancient history, parallels exist. Rome borrowed heavily to fund wars, but when revenues from conquest slowed, debt pressures contributed to instability. Greek city-states often defaulted on loans for wars and public works, sometimes facing harsh terms from creditors. These examples show that debt crises are not new—they recur whenever borrowing outpaces confidence or growth. The US today resembles Japan in its ability to sustain high debt thanks to strong institutions, but it also faces the cautionary lessons of Greece which is the fact that confidence can erode quickly if fiscal pressures mount.
The enduring lesson is clear. Growth and credibility are the true keys to managing debt—always, in every era.
Yet what makes our moment unique is the sheer scale and nature of America’s obligations. This equates into trillions measured not in coins or notes, but in digital promises that span generations. Unlike Rome or Britain, today’s US debt is not confined within borders; it is the backbone of the global financial system. It is a currency of trust upon which the world itself balances. The paradox is stark. America’s debt is both a source of unrivaled strength which funds innovation, defense, and prosperity—and a looming vulnerability, where credibility alone keeps the edifice from collapse. In Rome, coins endured centuries beyond the empire’s fall. In our age, the endurance of US debt will be measured not in metal, but in faith—faith that the United States will honor its word. Its fate will shape not just our future, but the stability of the global order itself.
Now the US debt saga is entering a new chapter. Digital currency is a significant emerging factor. Stablecoins backed by Treasuries are already creating new demand for government debt, while the prospect of a digital dollar promises to modernize payments and reinforce America’s global financial leadership. At the same time, these innovations force the United States to share monetary sovereignty with private issuers and foreign competitors. Digital currency is both stabilizer and disruptor. It may extend confidence in US debt, but it also tests whether credibility can endure in a world where money itself is no longer tangible.
In Rome, coins endured centuries beyond the empire’s fall; in our era, the endurance of US debt may hinge on whether digital dollars preserve faith in America’s promises.
Like we said. It’s the most boring subject imaginable, until it’s not!
Silver Denarius, struck around 162–163 CE in Rome. The denarius was the backbone of Roman commerce, widely circulated across the empire. Roman coins, including denarii, remained in circulation for centuries after the empire’s fall because they contained real silver. Hoards and records show Roman coins being accepted in trade well into the Middle Ages and in the colonies of the Americas. Their credibility came from metal content, not imperial authority.