Janet Yellen Warns Of 'Fiscal Dominance' Risk Due To Mounting US Debt: 'Should We Be Concerned About...?'

Core Viewpoint - Former Federal Reserve Chair Janet Yellen has issued a warning regarding the risks associated with the rapidly increasing national debt of the United States, which could limit policymakers' ability to address fiscal challenges and lead to "fiscal dominance" [2][4]. National Debt Concerns - The national debt is projected to exceed $38 trillion by late 2025 and could rise to $50 trillion, reaching 118% of GDP within the next decade according to Congressional Budget Office projections [3]. - Yellen indicated that fiscal dominance may result in increased term premiums and borrowing costs as investors become concerned about potential inflation or financial repression as methods to manage the debt [3]. Economic Implications - Yellen's warning aligns with concerns from other economists and financial experts about the implications of the national debt, including a potential "national security crisis" that could affect resource allocation [5]. - The changing profile of U.S. debt holders has led to higher and more volatile interest rates, raising concerns about the stability of the financial system [6]. Political Context - Yellen has previously expressed concerns about the politicization of the Federal Reserve, stating that such actions could lead to higher inflation, volatile growth, and weakened currencies, which would be detrimental to the U.S. economy [7].