Macro expert Lyn Alden is issuing a dire warning, saying that the Federal Reserve has effectively lost control of debt expansion in the United States.
Speaking at the Bitcoin 2025 Conference in Las Vegas, Alden explains how the Fed typically controls credit growth in the US financial system.
According to the macro guru, the Fed jacks up interest rates to slow down credit growth and inflation – a strategy which she notes has been effective for many decades.
But Alden warns that the US has reached a turning point where the national debt is now so massive that raising interest rates, meant to curb credit expansion, ultimately pushes the government to borrow more, causing public debt to balloon even faster than private debt can shrink.
“The problem is that many decades ago, when federal debt was low and most of the money creation was coming from the private sector, whenever they raised interest rates, they would slow credit growth. They would slow the private sector faster than they would blow out fiscal deficits.
The problem now is that the [US debt] is 100% of GDP, which only happened in recent years. When they raise interest rates, they ironically increase the deficit at a faster pace than they slow down private sector credit growth.
Basically, what that means is they don’t have brakes anymore. Nothing stops this train because there’s no brakes attached to it anymore.”
Alden also points out that the country will have an extremely difficult time managing the interest expense on its $36.22 trillion national debt.
“Now, we are in an environment where, for the first time in decades, interest rates are not going structurally down anymore, and debt levels are still very, very high. They’re the highest that they’ve ever been since the 1940s. And so interest expense is actually becoming a very meaningful part of the federal expense for the first time ever, and there’s no easy way to get that under control.
If they cut interest rates super low, then everybody wants to get into scarce assets. But if they keep interest rates high, they keep blowing up the federal deficit.”
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