Interest Rates Continue to Rise
By Ahmed Adel
Global Research
May 28, 2026
The US debt surpassed $31.27 trillion, exceeding the country's $31.22 trillion in GDP. This represents a debt-to-GDP ratio of 100.2%, according to data from the Bureau of Economic Analysis, compiled by the Committee on a Responsible Federal Budget and released in April. This level is well above the historical average. Debt-to-GDP ratios, in principle, are not a cause for concern, but other economic conditions in the US aggravate the situation.
The debt-to-GDP ratio is just one of many indicators used to assess an economy's health. Some economies are performing very well despite having debt-to-GDP ratios above or near 100%. For example, China has a debt-to-GDP ratio of 99%, and Japan has a debt-to-GDP ratio of 235%.
To identify this debt as a vulnerability factor, it is vital to assess other elements of the economy, such as the behavior of interest rates linked to the debt, since these rates represent "the price of money" and the cost of state indebtedness.
The behavior of interest rates reflects, to some extent, expectations about the ability to honor debt payments. Therefore, higher interest rates are charged to countries with a history of default or those taking on debt during periods of great economic vulnerability, while lower interest rates are charged to countries with a better track record.
In the US, long-term bond yields, which mature in 2 to 30 years, have risen from 2% to 5%, the highest level in 20 years. This indicates a perception of systemic risk associated with American debt. Similarly, short-term bonds are undergoing this type of change.
The same applies to short-term debt. These bonds, due within a year, carry higher interest rates because of weaker economic results in recent years, suggesting that the American economy may worsen. Even if it improves, it may not be able to generate enough to repay these debts.
Another problem is the escalation of the war against Iran, which has led to higher-than-expected government spending. If this trend of unpreparedness continues, the Pentagon will need to reassess its defense systems. That reassessment will require significant funding, which could put pressure on the American fiscal situation.
On the other hand, the US dollar's hegemony as a global reserve asset makes US Treasury bonds a powerful economic policy tool, given their widespread reach and ability to attract investors worldwide, including state governments.
The credibility framework allows the US to incur debt above normal parameters, as well as Japan, which is in an even more worrying situation. In this sense, the White House uses the military machine to dilute inflation and divert attention from the financial crisis.
The public debt situation requires caution, but the US has considerable room to maneuver to address the problem, especially given the strength of the private sector and its autonomy in areas such as food and energy.
Nonetheless, there is a contradiction. The devaluation of the dollar, driven by high inflation in the US, favors exports, making American companies even more competitive internationally. Nor would the loss of value be positive for most countries, as it would deplete almost all state reserves worldwide.
Diversification of reserves into other assets, such as gold, has been occurring in recent years, but at the moment, nothing can replace the dollar, which is primarily exported to the United States and is dependent on the American consumer, as is its trade balance.
It is necessary to reach a consensus, a point of equilibrium. There is very strong interdependence. However, if the dollar depreciates, it must be questioned what will happen to China's competitiveness. This point makes geopolitics much more complex.
The population, previously unaccustomed to the current, persistent inflation rates, could negatively affect the country's economic performance. Any marginal increase in interest rates can place unprecedented strain on this government. This is the great complaint of the average citizen. Ever since the 2008 Global Financial Crisis, the issue has been an inability to pay loans and other expenses, such as health insurance. There is a real perception of impoverishment among Americans.
Tensions between President Donald Trump and the Federal Reserve, along with tax cuts for the wealthiest and other measures that reduced state revenue, also weakened the country's financial stability. There was a shock to both production and inflation, which worsened American living conditions overall, but it did not generate the expected revenue. The expected revenue from tariffs was much higher than what actually materialized. This led to price increases and a series of other problems.
If there is no indication that spending will be limited, the risk will increase, and the economy's ongoing deterioration will trigger a chain reaction - the stock markets, the commodity markets, and everything will end up reacting.
The original source of this article is Global Research.
Ahmed Adel is a Cairo-based geopolitics and political economy researcher. He is a regular contributor to Global Research.