Former Federal Reserve Chair Janet Yellen has issued a stark warning about the potential risks posed by America’s rapidly increasing national debt.
Debt Surge Raises Fiscal Dominance Fears
Yellen, speaking at a panel on the “Future of the Fed” on Sunday, cautioned that the mounting national debt could severely limit policymakers’ ability to address the country’s fiscal challenges. She highlighted the risk of “fiscal dominance,” where political pressure forces the central bank to maintain lower interest rates than warranted by economic conditions.
Yellen warned that the national debt, surpassing $38 trillion in late 2025, continues to rise with little indication of slowing. She pointed to Congressional Budget Office projections showing it could climb to $50 trillion and reach 118% of GDP over the next decade.
Yellen said fiscal dominance is likely to push up term premiums and borrowing costs, as investors grow increasingly concerned that the government may turn to inflation or financial repression to manage its debt.
“Should we be concerned about the potential for fiscal dominance? In my opinion, the answer is yes,” stated Yellen.
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Yellen’s warning comes amid a series of red flags raised by economists and financial experts about the U.S. national debt. In November 2025, Richard Haass, the president of the Council on Foreign Relations, warned that the $38 trillion national debt could lead to a “national security crisis,” impacting the country’s ability to allocate resources effectively.
Later, Geng Ngarmboonanant, managing director at JPMorgan Chase & Co., and former deputy chief of staff to Yellen, also warned that the changing profile of U.S. debt holders has contributed to higher and more volatile interest rates, raising concerns about the stability of the country’s financial system.
Meanwhile, Yellen’s warning also follows her previous concerns about the politicization of the Federal Reserve. In August 2025, Yellen criticized President Donald Trump‘s move to “fire” a Fed governor, stating that politicized central banks deliver higher inflation, volatile growth, and weakened currencies, which cannot be good for the U.S.
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