The Duran Podcast - $40 Trillion Debt: The Mistake Empires Make

Episode Date: August 23, 2026

$40 Trillion Debt: The Mistake Empires Make

All right, Alexander, let's talk about what is happening with the U.S. economy, with the bond markets, and the history that has been made with U.S. debt, 40 trillion. First time that we've had the debt at this level. We also have Scott Bessett, actually putting out a statement. He was speaking to reporters saying that he does not understand what's happening with the oil price and then the bond markets, something to that effect. the first time that I've heard Bessent actually say that everything he's been doing, all the interventions that he's been doing, have not been working,

and he's unsure how to get on top of things. Well, indeed. And I think that that was an unwise thing for him to say, actually, because precisely for the reason that you've just suggested, which is that I think in a situation like this, in a very complicated situation, let's call it a fraught situation, if you like, with the situation in the market's becoming increasingly nervous, the suggestion that the Treasury Secretary is losing control,

which is what this basically implies, is not a wise one. Anyway, we had an intervention to support the yen. It costs a certain amount of money. It annoyed the Europeans, because the Europeans saw the euro holdings by the US sold. It supported the yen for a little while, but then exactly, as our friend Ray Zuccaro said, the yen resumed its fall.

The problem with fuel prices, we're talking about gasoline, diesel, aviation fuel, all of these things, is that diesel especially is getting increasingly, short supply because the heavy crude that comes from Russia and from the Persian Gulf is not reaching global markets, global energy markets in the quantity that is needed to produce diesel. And crude from Venezuela is still not being produced in anything like the quantity. is needed to make up the difference. It is a simple problem of supply. Now, these are important,

but in some ways incidental matters. What is happening is that the United States, for years, has been running deficits. The deficits became much bigger during the period of the pandemic. then as we discussed at the time, along came Joe Biden, and he started a major spending program intended to mirror Franklin Roosevelt's New Deal, complete misunderstanding of the situation of the US economy today. But an enormous attempt to run the economy hot. and that resulted in more inflation. It did not result in an increase in economic growth or industrial growth, quite the contrary.

And it made the deficit bigger still. And then Trump and Besson appear on the scene last year and they take over. And again, whereas the Republicans Trump, Bess and the others also at times talk about returning to fiscal responsibility. We've seen the budget deficit increased still further, this in peacetime. We see a deficit now that normally is at around between 7 and 8% of GDP, which is extremely high, and is probably, in fact, if you take into account of the book's spending, which, you know, is very extensive in the United States.

It's increasing further. Doge and Elon Musk's attempts to rein this all in last year failed in circumstances, which we all remember. The administration decided to increase defense spending even further and are planning 1.5 trillion spend on defense. And the result is an even bigger deficit. And the way you finance

deficits is by issuing debt, by issuing treasuries. So the debt is getting bigger, $40 trillion. And we start to see worries begin to grow now within the bond markets, something that has been talked about

for a long, long time that there would come a moment when buyers of American debt began to get more nervous, and there may be something in that, we also sense that geopolitics are now playing a role, so that, for example, the Chinese are becoming less willing to buy treasuries than they used to, because they are now engaged in effect in a kind of economic war with the United States at various levels. Japan, its economy, is evolving. And instead of buying American debt, they've been thinking of selling American debt and of repatriating their savings back to Japan. So all of this means that there is lower demand for American debt than they used to be, for treasuries than they used to be.

yields interest on the debt, which the government must pay as a result is growing. And that is complicating the problem. And lastly, I should say, and this is something which I find difficult myself to get fully my head round. But there is some suggestions that the AI boom is attracting a huge amount of funding. in other words, that the companies involved in AI are themselves releasing an awful lot of debt in order to fund their very ambitious investment programs, and that is now competing directly with the debt the government is releasing. And that means that there is less demand for government debt.

And that also is pushing yield prices. prices up higher. So we have all of these things coming all at the same time. And on top of that, we have the problems that Bessent was talking about, higher energy prices, higher food prices that we talked about in a recent program. In other words, inflation is probably going to rise at the end of this year and in theory the way you counter inflation is by raising interest rates

but you don't want to raise interest rates when the rate of interest on your debt is already grown. Yeah, Besson said that he's not sure why there was a spike in oil to be more precise. So that was his statement to the media. Well, I suggest he listened

to our programs in that case. Yeah, yeah. He knows why. Of course he does. Of course he does. It seems like he's putting his foot on the accelerator and he's just going to crash everything. Yes. And the belief is that the United States will be able to survive the crash.

Because if they really wanted to pull things back, they could pull things back. Of course. They could start pulling out of this conflict with Iran. That would definitely help the price of oil. That would calm things down. That would also help with insurers and the tankers that move through the Strait of Hormuz. Of course, geopolitically, they would have to admit defeat, something that's going to be impossible. But, you know, on the economic side of things, the global economic situation would improve

fairly quickly the sanctions. They could start removing sanctions against Russia. That would help. But they're not going to do any of these things. No, of course not, because the ideology and the politics make it impossible. And so they're not going to do any of these things. And as you absolutely rightly say, the solution always is to accelerate growth. Put your foot down on the accelerator instead of apply the brake and think that you can propel yourself through this crisis.

Now, the thing that I think a lot of people in Washington itself, and I suspect Scott Bessent is partly, shares this problem, is that they don't, I think, always fully grasp the fact that what they see is growth, in other words, very high GDP numbers, is often simply a reflection of the debt that is being issued. This isn't something that is discussed very more. I don't believe it's part of much of the curriculum anymore in economic schools. You have to go to people like Michael Hudson to understand this. But I think that this is the fundamental mistake that people like Bess and people like him are making, that if you put your foot on the accelerator, if you spend more, which is ultimately what Biden did, you know, Biden and his people, also doing, that this is somehow going to drive expansion faster and eventually your economy is going to expand faster than your debt will. It's based on a misunderstanding on economic policies

that the United States followed in the 1930s and 1940s in very different economic conditions. And I think that in fact, all this is going to do is it's going to feed further inflation because the demand will have to be satisfied. And at a time when all sorts of things like food and energy are short, the money that you're putting out there, it's going to raise prices even further. It's in other words, inflationary. And of course, it's going to raise debt too. So it doesn't, to me, make a huge amount of sense. And the other thing that I think underpins a lot of this is that many people in the United States perhaps got Besson as well. I think finding it very difficult to accept that there comes a point where even the credit

of the United States is not enough. they assume that the United States has unlimited credit. And of course, nothing, no one ever does. It's a mistake that lots of great powers, empires, if you like, make. The Romans made it. The French made it in the 1780s. The Russians made it in the 1960s. The British made it in the 1930s.

perhaps the Americans are about to make it too. All right. We will end the video there, the durand.com. We're on XronRumble. We're on Telegram. We are also on substack. All those links in description box down below.

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