Recent data from the US Treasury Department reveals that the national debt has surpassed $40 trillion for the first time in history. American media outlets have labeled this moment an "ominous milestone" and a critical "tipping point." Ray Dalio, founder of Bridgewater Associates, has cautioned that a "heart attack"-style debt crisis is approaching, drawing a stark comparison: "It's like a person whose arteries are already clogged with plaque, yet continues eating high-fat foods and avoiding exercise." Dalio warns that unless the US alters its current trajectory, a crisis could erupt within the next three years. The debt has ballooned from just over $10 trillion in 2008 to over $40 trillion now, a surge accomplished in less than 18 years.

Wang Yongli, former vice president of the Bank of China who participated in the bank's comprehensive response to the 2008 global financial crisis and the subsequent large-scale US quantitative easing, stated in an exclusive interview that while $40 trillion may not definitively represent a "tipping point," it is undeniably a critical juncture demanding close attention. Given the US dollar's status as a global reserve currency and the role of Treasuries as a foundational asset, any significant problem could have profound repercussions for global financial markets and the international monetary system.

Is $40 Trillion a True 'Tipping Point'?

When asked about Dalio's assertion that US fiscal conditions are entering a key "turning point" where inaction could make the debt problem unmanageable, Wang offered his perspective. He noted that judging whether a true "tipping point" has been crossed based solely on the absolute scale is difficult. Instead, two factors deserve more attention. First, the velocity of debt growth, which is accelerating. It took about 27 years for US debt to grow from $1 trillion to $10 trillion, but only about 18 years to jump from $10 trillion to over $40 trillion, with no signs of slowing. Second, the affordability of new debt issuance. As long as existing debt can be rolled over at a reasonable cost, increasing the scale isn't necessarily alarming. However, the current problem lies in the high cost of borrowing, with 10-year, 20-year, and 30-year Treasury yields at near 20-year highs. If the service cost becomes prohibitive, either the debt cannot be sold, or it becomes too burdensome to sustain. If foreign investors reduce their purchases, the debt would need to be absorbed domestically, ultimately placing pressure on the Federal Reserve, which could then impact the dollar's exchange rate, its credibility, and global liquidity. The recent decline in the dollar index and the Treasury Department's expansion of long-term bond buybacks, particularly the trends observed since August, suggest movements beyond normal fluctuation ranges, warranting high vigilance.

The Drivers Behind the Rapid Rise to $40 Trillion

Questioned on why the debt has climbed so quickly and how long US finances can endure the "interest snowball" effect—with the Congressional Budget Office (CBO) projecting interest costs to exceed $1 trillion for the first time in fiscal 2026 and reach $2.1 trillion by 2036—Wang explained the trajectory. Since the 2008 financial crisis, US government spending has continuously expanded. During the COVID-19 pandemic, the Fed implemented massive quantitative easing, injecting substantial liquidity. Subsequently, conflicts such as the Russia-Ukraine war and the Israel-Hamas conflict disrupted global supply chains, fueling US inflation. To combat this, the Fed was forced to raise interest rates, which directly pushed up Treasury yields and rapidly expanded the debt burden to $40 trillion. The CBO estimates that US federal revenue will be around $5.6 trillion in fiscal 2026, with roughly 19% of that income dedicated to interest payments. The US has consistently turned to quantitative easing in response to crises, which appears to suppress immediate problems but merely postpones them, accumulating greater risk. This suggests that the notion of "unlimited expansion of sovereign currency debt" is untenable. While currency devaluation can offer a subtle form of debt reduction, its effectiveness has clear limits. Once market confidence in the dollar erodes, runaway inflation and financial turmoil become unavoidable. For a long time, US Treasuries were seen as the world's safest asset, but that foundation of trust is gradually weakening. The trend of de-dollarization and the softening dollar index both reflect diminishing market confidence.

The Cost-Effective Borrowing of the World's Funds

Responding to data from the Bureau of Economic Analysis (BEA) showing US overseas financial assets at $42.96 trillion at the end of 2025, foreign liabilities at $70.49 trillion, and a net international investment position of negative $27.54 trillion, Wang addressed the perception of US reliance on foreign capital. He acknowledged that on paper, the US is a highly indebted nation. However, he emphasized that the nature of assets and liabilities is fundamentally different and cannot be simply aggregated. The majority of America's $42 trillion in overseas assets consists of active investments, such as opening factories, acquiring companies, or buying stocks abroad. In contrast, a large portion of the $70 trillion in assets held by other countries in the US is passive. Trade surplus nations earning dollars often have limited options but to park them in the US, either by purchasing Treasuries or depositing in banks. Despite a negative net international investment position of $27 trillion, the US consistently maintains a positive net income from abroad. The US borrows money from around the world at a very low cost and then reinvests it overseas to generate high returns. The interest it pays to foreigners is far less than the earnings it repatriates.

Regarding a recent European Central Bank report indicating that gold reserves have overtaken US Treasuries as the primary reserve asset for central banks, Wang commented on the sustainability of the "sell Treasuries for gold" strategy. He explained that countries increasing their gold reserves are primarily motivated by security considerations rather than investment returns. However, such accumulation is constrained by the limited supply of gold. Therefore, increasing gold holdings can only be a gradual, ongoing process, making a dramatic shift in reserve asset structures unlikely in the short term. Overall, global dollar assets haven't decreased significantly; rather, their composition is changing, with a shift from Treasuries towards other types of investments.

Can AI Rescue the US from its Debt Predicament?

Asked about Goldman Sachs' forecast that total US investment in AI will approach $600 billion in 2026 and whether this can help the US escape its debt crisis, Wang offered a nuanced view. He argued that the link between government debt and economic performance isn't straightforward. The US possesses a highly internationalized financial market. Emerging sectors like AI require massive capital inflows. However, this presents a problem: AI and other new industries are absorbing vast amounts of capital, which is a significant reason why US Treasuries are becoming harder to sell. At least during the current boom phase, the market is more eager to acquire AI-related assets. Ultimately, whether AI can help the US resolve its debt crisis depends on whether it can deliver real, tangible value rather than remaining a speculative concept.