The Rising US Interest Burden: What It Means for Debt, Gold, and Bitcoin

Key takeaways

• Interest costs are surging: Annual payments have jumped to $1.1 trillion.
• Market-driven yields are driving risk: Refinancing debt at higher rates is compounding interest burdens.
• Low yields once masked rising debt: For decades, cheap borrowing kept interest-to-GDP relatively low.
• Fiscal dominance is emerging: Rising debt costs may limit monetary policy independence.
• Store-of-value assets gain appeal: Gold, and potentially Bitcoin, offer a hedge against fiscal stress.

Understanding US deficit and debt structure

The US government consistently runs budget deficits, spending more than it collects in tax revenue each year. To finance the shortfall, it issues debt in the form of Treasury securities. Investors, both domestic and foreign, purchase this debt in exchange for interest payments over time. While this model allows the government to keep operating, it also steadily adds to the total debt load.

In 2000, the US public debt, the total amount owed by the federal government, stood at $5.7 trillion. By 2019, just before the COVID-19 pandemic, it had climbed to $23 trillion. After COVID hit, that figure surged to over $36 trillion, as the government undertook a massive borrowing spree to finance rising deficits and pandemic-related spending programs. In recent years, government debt has grown exponentially, with the debt-to-GDP ratio now exceeding 120%, a level even higher than during World War II.

Servicing the debt: why maturity matters

While the level of debt matters, what matters even more is the cost of servicing it: how much the government must pay in interest. Before diving into current interest payments, it's important to understand that government debt comes in different maturities, each with its own interest rate. The Treasury, the government's financing arm, borrows by issuing:

• T-Bills – short-term debt, typically maturing in one year or less
• T-Notes – medium-term debt, maturing in 2 to 10 years

• T-Bonds – long-term debt, with maturities of 20 to 30 years

  

As of June 2025, government debt was composed of about 16% in short-term securities, a substantial 41% in medium-term, and another 14% in long-term. This breakdown matters for two key reasons:

1. The majority of outstanding debt is concentrated in intermediate maturities, and
2. Yields on medium and long-term securities are set by market forces, not the Federal Reserve.

That means when these debts mature, they aren’t repaid outright; the Treasury rolls them over by issuing new securities at prevailing market rates. If rates are higher, as they are today, refinancing becomes much more expensive. This is what's known as interest rate risk: the danger that as older, lower-yielding debt matures, it must be replaced with new debt carrying higher interest costs, compounding the fiscal burden over time.

How low yields once masked a growing debt load

Taking the 10-year Treasury yield as a proxy for government borrowing costs, we can observe that yields were in a structural downtrend for decades. This kept interest payments relatively low, even as overall debt levels climbed. In fact, interest payments as a percentage of GDP fell from 4.96% in 1985, when the 10-year yield was over 11%, to just 2.33% in 2015, despite debt growing from $1.7 trillion to $18.1 trillion over that period. This decline was driven by two key forces: falling yields (on average, across all maturities), and rising GDP. The combination of cheaper borrowing and a growing economy helped suppress the relative burden of interest payments.

Following 2020, a surge in both debt levels and interest rates has caused interest payments to spike, from $508 billion in 2020 to approximately $1.1 trillion today. As a result, interest payments as a share of GDP have jumped by over 58%, rising from 2.34% to 3.72%. It’s important to understand that yields on medium and long-term U.S. debt are set by the market, where investors demand compensation for two primary risks: inflation and the (still very low) likelihood of delayed repayment or fiscal stress. As inflation accelerated post-COVID and interest rates rose in response, the cost of servicing both new and maturing debt increased dramatically. 

This dynamic creates the risk of a feedback loop: higher interest outlays widen the fiscal deficit, forcing the Treasury to issue more debt, which could, in turn, push yields even higher if investor confidence begins to erode. That said, while the debt-to-GDP ratio is now at record highs, the interest-to-GDP ratio remains below its early 1990s peak. In that sense, the U.S. has managed similar fiscal conditions before. Still, the current trajectory presents growing risks, especially if interest rates remain elevated for an extended period.

The trend ahead

With the Congressional Budget Office projecting that net interest payments will rise to 4.1% of GDP in the coming years. While we’ve focused on gross interest payments until now, this net figure still reinforces the core concern: the cost of servicing U.S. debt is rising faster than the economy. This trend reflects an environment increasingly shaped by fiscal dominance, where central bank may be forced to tolerate higher inflation or suppress interest rates to stabilize government finances. In such a regime, store-of-value assets like gold tend to perform well, serving as a hedge against the risk of currency debasement and eroding confidence in fiscal sustainability.

The U.S. dollar holds value largely because people trust the government to honor its debt obligations and sustain tax revenues. As interest payments rise, that trust can be tested. While the risk of default remains low for the US, rising debt-servicing costs make the system more fragile. Between 1970 and 1980, interest payments as a share of GDP rose from 2.49% to over 4%, and gold surged from $35 to $631 per ounce. Since 2022, gold has begun to follow a similar trajectory, once again acting as a hedge as rising interest costs strain the government’s balance sheet.

As these trends unfold over the coming years, holding store-of-value assets, those that are scarce and difficult to create or inflate, becomes a rational response. As we noted in our article "Is Bitcoin the New Gold?", Bitcoin shares many of the same store-of-value characteristics as gold: finite supply and resistance to manipulation. Whether Bitcoin will behave like gold in a high-debt, high-interest-rate environment remains an open question. But in a world of rising fiscal strain and eroding trust in fiat stability, it’s a question worth watching closely.