alt Hacker NewsCan somebody explain what this means exactly?
Why do they need to pay it back? If they pay it back, then what will happen?
I'm from a developing country. My country is objectively much worse than US in every aspect. My country doesn't export anything significant. There's no innovation. insane level of corruption. Yet we don't have this issue. Nobody screams that the country will collapse.
Is this kind of doomsday thinking an American-only culture?
Replies
US Debt is not the same as personal debt. US Treasuries are the same as cash so it is just a measure of how much USD are in the global economy. So long as the "debt" can be serviced there is no issue.
The world economy is based on the idea that America will always repay its debt. Them not paying it back will be the financial equivilent of a nuclear bomb, not just for them, but for literally everybody.
Others have spoken to why US treasuries were considered a risk free asset, what is important now is that the US Treasury's market participation has been to attempt to keep borrowing costs lower without paying down the debt (US-Japan currency bailout, treasury bond buyback). The bond market is rejecting the theatrics. Fiscal policy can change (spend less, stop issuing new debt, start paying down existing debt), or yields will continue to rise, causing a potential debt spiral (as the US will be forced to issue new debt and refinance existing debt at ever increasing interest rates). Imagine your credit card interest rate keeps increasing, while you carry a balance the size of your annual income, you keep charging on the card, and the limit is unknown.
This will flow into consumer debt markets, pushing up borrowing costs for everyone (auto loans, credit cards, mortgages, etc), as all consumer debt is priced off of "risk free" US treasury yields. This could slow the US economy further, and the economy is already at stall speed without AI investment.
https://think.ing.com/snaps/us-treasury-ups-its-buying-of-lo...
https://think.ing.com/articles/rates-spark-what-the-is-going...
https://www.axios.com/2026/08/20/bonds-fed-treasury-policy
https://www.axios.com/2026/08/20/bonds-treasury-foreign-hedg...
https://www.axios.com/2026/08/19/rates-treasury-borrowing-be...
https://www.axios.com/2026/08/17/treasury-yields-warsh-bonds
For decades, the U.S government has been spending much more than it takes in from taxes. To make up for the shortfall, it uses debt in the form of U.S. treasury bonds. They currently pay about 5% a year.
They have long been considered risk free. Boring, safe, low return investments. Companies or people who need absolutely reliability in their investments buy them - the elderly, pensions, insurance companies, banks the world over.
The U.S. has issued so many of these bonds that the total amount outstanding right now is $40T. This amount is so staggering that to simply pay that 5% in interest payments costs us more than it takes to fund our very large, expensive military.
If they don't pay it back, and declare all those bonds worthless - well all of those people who were relying on what they thought was a rock solid, safe investment go bust. Banks fail worldwide, pensions run dry, retirement funds suddenly are empty, all kinds of businesses collapse. It would make the financial crisis of 08 look like a joke, and it would be a true catastrophe.
That is almost surely not going to happen.
What could happen is that we enter a debt spiral - investors get worried we won't be able to pay it back, and view bonds as less than perfectly safe. They now want 6%. The U.S. has to pay even more in interest every year, so they issue more debt to roll it over, which makes it worse and we get to 7%, etc.
Typically in this situation, a country either quickly gets its act together and commits to reducing spending and raises taxes, or they just turn on the money printers, and use inflation to make that debt smaller in real terms. I have little faith in the U.S. to commit to fiscal austerity and expect them to try to inflate the debt away.
Probably your country doesn't get good deals on money loans and hence it doesn't borrow more than it can pay.
The US on the other hand keeps borrowing and borrowing