For the first time since the Second World War, excluding the COVID-19 pandemic, public debt in the United States has surpassed the entire economy’s GDP. As of late March, debt held by the public reached US$31.27 trillion, just ahead of the GDP of US$31.22 trillion.
This threshold is often treated as a long-term fiscal issue, but the economic costs of this debt are now moving to the forefront. The most immediate pressure comes from the possibility that major foreign holders of American assets begin pulling capital out of U.S. markets.
Gulf states — whose confidence in U.S. fiscal and military protection has been shaken by the U.S.-Israel attacks on Iran — collectively hold roughly US$2 trillion in U.S. assets through their sovereign wealth funds.
