The warning lights on the global financial markets are flashing again. The US federal debt has surpassed $36 trillion, reaching a historic high, and the fiscal deficit for the 2024 fiscal year has hit $1.83 trillion. The International Monetary Fund even predicts that by 2030, the debt-to-GDP ratio will soar to 143%—a level that exceeds Greece and Italy during the Eurozone crisis.

The real issue is that, in order to conceal the debt hole, financial authorities are caught in a dilemma. With inflation still at 3%, they need to maintain low interest rate policies to support the economy. As a result, the 10-year US Treasury yield once surged to 4.8%, directly lowering the living standards of American households—adding an extra $4,000 annually to the average American's cost of living.

What’s more painful is that global creditors are starting to vote with their feet. Last year, China reduced its US Treasury holdings by $57.3 billion, and traditional buyers like Japan and the UK are also selling off in sync. Overseas official funds have net flowed out by over $75 billion. This indicates that the myth of "US Treasuries as safe assets" is crumbling.

Domestic political struggles are making things worse. The Trump administration forcibly intervened in spending bill negotiations, forcing Congress to pass a temporary funding measure late last year, which will only last until March 2025. The Republican Party wants to cut welfare spending, while the Democrats are sticking to their tax revenue bottom line. But both parties know—Social Security will go bankrupt by 2034, and Medicare by 2033—yet they still refuse to budge on the debt ceiling issue. Moody’s has already downgraded the US credit rating from AAA to Aa1.

The ripple effects of this crisis are spreading globally. The US dollar’s reserve status is weakening, borrowing costs in emerging markets are soaring, and the cryptocurrency market is also facing liquidity contraction pressures. In just three months, government funds will run out again. Will the two parties really sit down to implement a reform plan that includes tax hikes and spending cuts, or will the US continue to slide into the "debt trap" abyss, dragging down the global economy? The answer to this question may come faster than we think.