Yellen Warns of Fiscal Dominance Risk as US National Debt Hits $38.5 Trillion
Written by Ohris M. Greyoon, Blockchain & Crypto Expert
Source: Coinmarketcap
Updated: Jan 05 2026- Escalating Fiscal Dominance Risk: Yellen highlighted at the American Economic Association annual meeting that the preconditions for fiscal dominance are strengthening, particularly as the US national debt surpassed $38.5 trillion in early 2026, which could lead the Fed to maintain low interest rates to ease debt servicing costs, thereby impacting inflation control.
- Rising Debt-to-GDP Ratio: The Congressional Budget Office forecasts a federal deficit of $1.9 trillion for 2026, with total debt expected to approach 100% of GDP and soar to about 118% over the next decade, posing a long-term challenge to economic stability.
- Political Pressure and Economic Risks: Yellen noted that President Trump pressured the Fed to lower interest rates to alleviate government debt burdens, warning that achieving this goal could risk turning the US into a “banana republic,” highlighting the potential dangers of political interference in economic policy.
- Need for Bipartisan Cooperation: While Yellen expressed optimism about Congress reaching a bipartisan budget reform deal following a crisis related to Social Security and Medicare, economist Romer expressed skepticism, asserting that failing to address fiscal issues will lead to severe consequences for everyone, including the Fed.
About the author
Ohris M. Greyoon
Ohris M. Greyoon holds a Master’s in Computer Science from MIT and has 10 years of experience in blockchain technology and cryptocurrency markets. A pioneer in decentralized finance (DeFi) analysis, he leads Intellectia’s Crypto News, offering cutting-edge insights into digital assets.
