America Just Crossed $40 Trillion. What Happens When the Bond Market Says Enough?

For decades, the United States has operated with one enormous advantage that almost every other country on earth would envy.

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It could borrow.

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Through recessions, wars, financial crises and a global pandemic, Washington could issue more debt and, somewhere in the world, buyers would generally be waiting. Banks bought it. Pension funds bought it. Foreign governments bought it. Central banks accumulated it. U.S. Treasury securities became the foundation beneath much of the global financial system.

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That system has not disappeared.

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But something is changing.

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Earlier this month, in August of 2026, U.S. federal debt crossed $40 trillion for the first time. Of that amount, roughly $32.3 trillion is held by the public, while another $7.8 trillion consists of intragovernmental holdings. Interest expense has now become the second-largest major item in the federal budget, behind Social Security.

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The more important number, however, may be the price Washington is increasingly being asked to pay to keep borrowing.

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Recently, the 30-year Treasury yield reached 5.34%, its highest level since 2007.

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That creates the question sitting underneath my recent conversation with former Wall Street executive and bestselling author Nomi Prins:

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What happens if America still needs trillions of dollars of new financing, but investors increasingly demand higher yields to provide it?

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The $40 Trillion Problem Is Really a Refinancing Problem

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A $40 trillion headline is almost too large to mean anything.

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It becomes more tangible when you look at what the next few years could bring.

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The Congressional Budget Office projects a federal deficit of roughly $1.9 trillion in fiscal 2026. Debt held by the public is expected to equal approximately 101% of GDP this year and climb to 120% by 2036, which would exceed the previous post-World War II record.

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Net interest expense is expected to exceed $1 trillion this year alone. By 2036, CBO projects it will reach approximately $2.1 trillion annually.

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And the borrowing machine is not slowing down.

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The Treasury currently expects to borrow another $739 billion in privately held net marketable debt during the July through September quarter, followed by approximately $628 billion during the final three months of 2026.

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That is more than $1.3 trillion of expected net marketable borrowing over just six months.

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Alex welcomed Nomi Prins onto the Pinnacle Podcast recently, where she explained what investors should be paying attention to,  

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“We don't have external buyers of debt. That's a story.”

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That is an intentionally provocative way of putting it, and foreign demand for Treasuries certainly has not vanished. But her broader argument is harder to dismiss: when the government is issuing enormous quantities of debt, the marginal buyer increasingly matters.

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If buyers want 5% or more to hold long-duration Treasury securities, servicing yesterday's debt becomes progressively more expensive as securities mature and are refinanced.

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That can become a feedback loop.

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More debt produces more interest expense. More interest expense contributes to larger deficits. Larger deficits require more borrowing.

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And more borrowing requires another buyer.

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The Market Is Beginning to Push Back

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The tension became particularly visible this month.

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As long-term yields surged, the Treasury doubled the size of certain long-dated bond buyback operations to at least $4 billion per operation. Treasury Secretary Scott Bessent has subsequently indicated those purchases could be expanded further.

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A Treasury buyback is not the same thing as Federal Reserve quantitative easing. The programs have different purposes, balance sheets and monetary implications.

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But psychologically, the timing matters.

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The world's largest bond market is suddenly debating government intervention at precisely the moment federal debt has crossed $40 trillion and long-term borrowing costs are reaching levels not seen in nearly two decades.

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Prins believes the pressure could eventually move beyond Treasury market-management tools and back toward the Federal Reserve.

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Her argument is that lowering an overnight policy rate by 25 basis points does very little to solve a government funding problem concentrated farther out on the yield curve.

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In the latest podcast she put it this way:

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“They have to find a way to do some form of quantitative easing in the long end.”

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Whether the Fed actually does that is a very different question.

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There is no current Fed announcement of a return to large-scale QE. In fact, the political and inflationary consequences of restarting major asset purchases with long-term yields elevated could be substantial.

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But that is exactly what makes the situation interesting.

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Doing nothing leaves Washington exposed to increasingly expensive refinancing.

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Intervening too aggressively risks convincing investors that fiscal dominance has arrived and monetary policy is increasingly being shaped by the government's financing requirements.

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Neither path is especially comfortable.

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Now Look at What Central Banks Are Doing

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There is another piece of this story that deserves considerably more attention.

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While governments are issuing more debt, central banks around the world have been accumulating gold at an extraordinary pace.

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The World Gold Council estimates central banks have purchased an average of roughly 1,000 tonnes of gold annually over the past four years, approximately double the average pace of the previous decade.

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Its 2026 survey of 76 central banks found that 89% expect global official gold reserves to increase over the next 12 months.

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More strikingly, a record 45% said their own institution expects to increase its gold reserves.

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Meanwhile, 74% expect the dollar's share of global reserves to be lower five years from now.

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These are not theoretical intentions alone.

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Central banks bought a net 289 tonnes of gold during the second quarter of 2026, a record second quarter and a fivefold increase from Q1. Poland, China, Uzbekistan and Kazakhstan have been among the notable buyers this year.

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Prins sees this as part of the same story as the bond market.

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Debt is abundant.

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Gold isn't. On price targets, she isn't shy, stating,

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“The trajectory of gold is towards that point and higher.”

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The “point” she was referring to is her $6,000 gold target sometime this year or early next. That is her forecast, not ours, and no investor should treat a specific price target as inevitable.

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The more interesting question is why someone who has spent much of her career studying central banks believes gold deserves that kind of valuation.

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Her answer has less to do with a particular chart pattern than with scarcity, reserve diversification and confidence.

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Prins explains why she believes central-bank behavior may matter more than short-term price volatility, and why she continues to see substantially higher prices for gold.

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The Asset the Fed Cannot Create

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This is where the story expands beyond gold.

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Silver has now spent six consecutive years in structural market deficit.

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The Silver Institute estimates that the cumulative deficit over that period will reach approximately 762 million ounces in 2026. That is somewhat below the roughly 820 million ounce figure Prins referenced during our conversation, but it strongly supports the underlying point: years of demand have exceeded newly available supply.

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At the same time, silver's role is changing.

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It remains a monetary metal, but it is also consumed by solar panels, electronics, electrification, defense applications and increasingly the infrastructure surrounding data centers.

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Copper faces its own version of this problem.

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AI may feel like a software revolution when viewed through a laptop screen, but the physical infrastructure underneath it is extraordinarily material-intensive.

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Data centers need electrical generation. They need transmission infrastructure. They need cooling. They need copper wiring, silver, steel, aluminum and enormous amounts of power.

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There is a strange contradiction developing.

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The digital economy is becoming more sophisticated, but building it requires some of the oldest materials on earth.

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Prins summed up the commodity side of the argument in six words:

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“You can't print physical supply.”

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That may ultimately be the most important line in the entire conversation.

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Governments can issue more currency.

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Treasuries can issue more bonds.

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Central banks can expand balance sheets.

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Technology companies can issue stock or borrow billions to construct data centers.

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None of those actions instantly creates another copper mine.

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They cannot manufacture a new silver deposit.

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And they cannot compress the decade or longer that it can take to discover, permit, finance and develop a major new mine.

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From AI Boom to Commodity Mega Cycle

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For the last several years, investors have understandably concentrated on the companies building artificial intelligence.

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Nvidia became the symbol of that trade.

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Prins believes the next opportunity may increasingly lie farther down the supply chain.

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During our conversation she argued that some high-quality mining companies remain underappreciated compared with the technology companies ultimately dependent on their materials.

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She goes further than simply calling commodities a cyclical trade, stating,

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“I think that we're at this, not super cycle, but mega cycle in commodities.”

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That does not mean every commodity rises together.

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It certainly does not mean every mining company succeeds.

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Geology matters. Management matters. Jurisdiction matters. Financing matters. Costs matter enormously.

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But zoom out and an unusual combination is emerging.

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Washington needs more capital.

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Interest expense is climbing.

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Long-term Treasury yields are challenging policymakers.

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Central banks continue accumulating gold.

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Silver remains in structural deficit.

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AI infrastructure is increasing demand for physical resources.

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And governments from Washington to Beijing are treating critical minerals less like ordinary commodities and more like strategic assets.

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Those stories appear separate when viewed one headline at a time.

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They may actually be chapters of the same story.

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Watch the complete interview with Nomi Prins for our discussion on the Federal Reserve, gold, silver, copper, AI infrastructure, mining jurisdictions and what she calls the emerging commodity mega cycle.

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The Question Investors Should Be Asking

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The most important development of 2026 may not be whether the Federal Reserve cuts rates at its next meeting.

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It may not even be whether gold reaches $6,000 or silver returns to its previous highs.

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The larger question is one of confidence.

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For decades, America's fiscal system depended on the assumption that enormous amounts of Treasury debt could always find a home at a manageable price.

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At $40 trillion of federal debt, with more than $1 trillion of annual net interest expense and another wave of borrowing ahead, that assumption is being tested.

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The bond market has not broken.

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Treasury auctions are still functioning. Buyers still exist. The dollar remains central to the global financial system.

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But buyers are asking for more.

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And elsewhere in the system, some of the world's largest reserve managers are steadily accumulating an asset no central bank can manufacture.

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That does not tell us exactly what happens next. But, it does tell us where to look.

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