Concerns Over Federal Reserve’s Debt Management
Lyn Alden, a noted macroeconomic analyst, has raised an alarming issue regarding the Federal Reserve’s management of the nation’s debt, suggesting that it has lost the ability to curb debt growth effectively. During her presentation at the Bitcoin 2025 Conference held in Las Vegas, Alden elaborated on the Fed’s traditional role in regulating credit within the U.S. economy. Normally, to combat inflation and moderate credit expansion, the Fed raises interest rates; this method has been a reliable tool for several decades. However, she highlighted that this approach is now facing a significant obstacle.
Impact of National Debt
With the national debt reaching an unprecedented level, being equivalent to 100% of the country’s GDP, Alden noted that the impact of higher interest rates is counterproductive. Instead of reducing borrowing, rising rates are forcing the government to incur even more debt, leading to a rapid increase in public liabilities that surpasses any potential decrease in private sector debt.
“In previous decades, when federal debt was manageable, elevating interest rates effectively curtailed credit growth in the private sector. Today, however, the dynamics have reversed; increasing rates only exacerbate the fiscal deficit,”
she explained.
Challenges Ahead
Alden articulated this scenario with concern, stating,
“It’s as if there are no brakes on this financial train. The system is accelerating without any means to decelerate its borrowing.”
Furthermore, she pointed out that managing the interest on the staggering $36.22 trillion national debt poses a significant challenge. According to her, we are witnessing an era where interest rates are no longer on a downward trajectory, and the substantial levels of debt are at their highest since the 1940s. This situation means that the costs associated with interest payments have started to take up a significant portion of federal spending. Alden cautioned that whether interest rates are kept high, further inflating the deficit, or lowered to stimulate demand, leading everyone to chase limited investment opportunities, a resolution appears elusive.
Alden’s analysis presents a stark view of the economic landscape, warning of the complicated fiscal environment that may lie ahead for the U.S. economy if these trends continue.
