America's path out of $38 trillion national debt crisis likely involves pushing up inflation and 'eroding Fed independence,' says JPMorgan Private Bank | Fortune

"Business leaders, policymakers, and investors are growing increasingly concerned by the United States's borrowing burden, currently sitting at $38.15 trillion. The worry isn't necessarily the size of this debt, but rather America's debt-to-GDP ratio-and hence, its ability to convince investors that it can reliably pay back that debt. It currently stands at about 120%. To reduce that ratio requires either GDP to increase or scaling down the debt. On the latter end, this could include cutting public spending."

"This was already tried by the Trump administration, with the Department of Government Efficiency (DOGE) under Elon Musk claiming to have saved $214 billion. While those savings were drastically lower than promises made by the Tesla CEO when DOGE was first formed, and they're a drop in the ocean of the bigger U.S. deficit picture, it does reveal the renewed focus Washington is giving to debt."

"JPMorgan writes: "Some market participants warn of a coming U.S. debt crisis. In the most extreme scenario, the Treasury holds an auction and buyers are nowhere to be found. We see a more subtle risk. In this scenario, instead of a sudden spike in yields, policymakers make a deliberate shift. They tolerate stronger growth and higher inflation, allowing real interest rates to fall and the debt burden to shrink over time.""

U.S. federal debt totals $38.15 trillion and the debt-to-GDP ratio is roughly 120%, raising concerns about investor confidence in repayment. Lowering the ratio requires faster GDP growth or shrinking nominal debt, including public-spending cuts. The Department of Government Efficiency (DOGE) under Elon Musk reported $214 billion in savings, far below initial promises and small relative to overall deficits, but indicative of renewed focus on debt reduction in Washington. JPMorgan Private Bank's 2026 outlook advises positioning for AI, adapting to fragmentation, and preparing for a structural inflation shift, noting a scenario where policymakers tolerate higher inflation to lower real interest rates and shrink the debt burden.

Read at Fortune