51,536,969,453 US national debt reaches a historic high, with 25% of tax revenue used to pay interest, which indeed raises concerns about inflation, long-term fiscal stability, and the future direction of the dollar, as follows:
On Inflation
- Increased money supply: To repay debt and pay interest, the US government may resort to increasing the money supply, which will lead to an increase in the money supply and thus trigger inflation.
- Demand-pull inflation: The government maintains fiscal spending through borrowing, which may stimulate economic growth and increase total demand. When supply cannot respond quickly, it may lead to rising prices, triggering demand-pull inflation.
On Long-term Fiscal Stability
- Debt sustainability issues: The continuously growing debt and high interest payments burden the US government with increasing debt, which may lead to a rise in the risk of default and affect national credit.
- Limited fiscal space: A large portion of tax revenue is used to pay interest, limiting government spending in other important areas such as infrastructure, education, and healthcare, thus affecting the long-term growth potential of the economy.
On the Future Direction of the Dollar
- Eroded confidence: Huge debt and high-interest payments may lower investors' confidence in the US economy and the dollar, leading to capital outflows and dollar depreciation.
- Pressure on currency depreciation: To address the debt issue, the US government may adopt loose monetary policies, which will further weaken the value of the dollar.
- Challenges to international status: As other countries lose confidence in the dollar, it may accelerate the process of 'de-dollarization,' reducing the dollar's status in the international monetary system.