Yellen Warns of Rising Fiscal Dominance Risk as US Debt Nears 100% of GDP
Janet Yellen sounded the alarm on fiscal dominance risks during the American Economic Association’s annual meeting, noting deteriorating debt sustainability. The former Fed chair’s warning comes as US national debt surges past $38.5 trillion—a threshold not expected until 2030—with this year’s deficit projected to hit $1.9 trillion.
Economists highlight the dangerous feedback loop: mounting debt could force the Federal Reserve to prioritize low interest rates over inflation control. When central banks monetize debt at the expense of price stability, the resulting fiscal dominance erodes monetary policy independence.
The Congressional Budget Office forecasts debt-to-GDP ratios approaching 100%, a red line for many fiscal hawks. Such levels historically correlate with slower growth, higher borrowing costs, and reduced policy flexibility—factors that could accelerate institutional cryptocurrency adoption as hedge assets.
