The U.S. Debt Spiral and the Final Reckoning, according to John Rubino

28th November, 2025

The looming U.S. debt spiral is has become the defining feature of America’s late-stage economic order. Every empire eventually reaches a point where its financial foundations decay from within, where debt expansion becomes the only remaining engine of “growth,” and where political paralysis prevents even the most basic course correction.

The United States crossed that threshold years ago, but the acceleration now is unmistakable. The fiscal recklessness that began in 1971, when the dollar was severed from gold convertibility, has matured into something far more dangerous: a self-reinforcing cycle of deficits, rising interest costs, and structural imbalances that even mainstream analysts can no longer ignore.

John Rubino has been one of the clearest voices pointing out this descent; not as sensationalism, but as a sober recognition of a system that has exhausted its options. What he describes as the drift toward a failed-state trajectory is simply the natural result of fiscal irresponsibility and financial markets that have been distorted beyond recognition.

Today, the United States finds itself trapped by long-term debt dynamics it can no longer control, sitting atop asset bubbles it can no longer sustain, and governed by institutions that no longer possess the discipline or cohesion to respond. The era that began with the end of sound money is now approaching its reckoning. The U.S. debt spiral is the symptom; the unraveling is the inevitable consequence.

The Mechanics of a Debt Spiral No One Wants to Admit

A debt spiral is not complicated. When a government borrows too much, the interest burden grows. When the interest burden grows, deficits expand. When deficits expand, the government must borrow even more. Eventually the growth of debt outpaces the growth of the economy that supports it. The system becomes dependent on the issuance of new debt simply to maintain basic functions; it’s a classic hallmark of a Ponzi dynamic.

The United States is deep in this cycle. Its annual deficit is now in the realm of two trillion dollars, and that is during a period without recession, war mobilization, or emergency stimulus. Historically, deficits of this magnitude occurred only during cataclysmic events. Today they are baseline.

Interest expense alone is exploding. As the Treasury rolls short-term debt into higher rates, the government finds itself trapped. Even if nominal spending were frozen (politically impossible in an era of entitlement addiction and geopolitical adventurism) interest costs would continue rising. The U.S. is now spending more on interest than it does on many core government functions. This is what ‘fiscal dominance’ looks like.

Rubino’s point is crucial: once interest expense becomes the dominant budget item, the debt spiral becomes irreversible without either austerity (politically suicidal), default (politically unthinkable), or inflation (politically convenient). And inflation; the stealth tax that slowly annihilates savers and wage earners, is the path policymakers always choose. It is the only tool that preserves the illusion of control.

But inflation and debt are joined at the hip. One feeds the other. And once confidence in the underlying currency begins to erode, the spiral tightens.

The Illusion of Growth and the Hollowing of the Real Economy

A nation can borrow recklessly if its productive capacity is expanding robustly. The United States, however, has spent the last fifty years replacing productive industry with financial engineering. The offshoring boom hollowed out the manufacturing base, leaving the economy dependent on services, consumption, and asset inflation.

Financialization filled the void. Debt became the mechanism through which growth was simulated. Corporations borrowed massively to buy back shares instead of investing in innovation or domestic capacity. Consumers borrowed to sustain lifestyles that real wages could no longer support. The federal government borrowed to paper over economic stagnation and geopolitical overreach.

The result: a mountain of debt built atop a shrinking base of real production.

When financial markets inflated, it created the illusion of prosperity — rising home values, soaring stock portfolios, rapidly appreciating bonds. But these weren’t signs of economic vitality. They were distortions created by money-illusion. The more the Federal Reserve intervened, the more markets detached from underlying fundamentals. Interest rates suppressed to near zero ensured that capital flowed into speculative assets rather than productive investment.

Rubino alludes to the consequences: when the foundational asset markets become bubbles, their eventual bursting becomes a systemic threat. You cannot build a stable economy on real estate speculation, leveraged equities, and government IOUs. Yet that is precisely what the United States has done.

The Fragility of the Treasury Market and the Threshold of Breakdown

Most Americans assume that U.S. government debt is the safest asset in the world. That assumption is now outdated. The Treasury market has become one of the key fault lines of the U.S. debt spiral.

When deficits explode, the government must issue ever-increasing amounts of bonds. But the demand for those bonds is weakening. Foreign central banks, once the backbone of U.S. debt financing, have reduced their purchases or shifted to net selling. Domestic buyers are saturated. Banks are overexposed. Pension funds are already underwater.

The result is a structural imbalance: the supply of Treasuries is rising at a record pace while natural demand is drying up.

This is the kind of imbalance that destabilizes reserve-currency systems. It forces the government to offer higher and higher yields to entice buyers. But higher yields mean higher interest costs, feeding the debt spiral further. Eventually, the market reaches a point where yields spike not because investors expect inflation, but because they doubt solvency.

That shift from inflation fear to solvency fear is the true beginning of a sovereign debt crisis.

The U.S. is now drifting dangerously close to this threshold. A number of high-yield Treasury auctions in recent years have revealed waning demand, something Rubino and other sober analysts have warned about. The government can maintain the illusion of normalcy only as long as auctions remain orderly. But once a failed auction occurs, or once the bid-to-cover ratio collapses meaningfully, the Treasury market becomes a transmission channel for systemic panic.

A sovereign debt crisis in the world’s reserve currency issuer would be unlike any financial event in modern history. And yet, under the current trajectory, it is not just possible – it is probable.

The Triple Bubble: Stocks, Bonds, and Real Estate

Asset bubbles do not exist in isolation. They are expressions of the same underlying monetary disorder. Today, the United States is grappling with three simultaneous bubbles:

The bond bubble inflated by decades of rate suppression
The stock bubble fueled by cheap leverage and buybacks
The real estate bubble propped up by artificially low mortgage rates and chronic supply constraints.

Each of these bubbles is historically large. Together, they represent the most overvalued asset environment in American history. And unlike previous cycles, the ability to reinflate these bubbles after a crash is limited. The Fed’s traditional monetary policy playbook (slash rates, expand liquidity, jawbone confidence) is constrained by inflation and debt levels never before seen.

Rubino’s fatalistic assessment resonates here. When you have three bubbles inflated by the same monetary mechanism, the bursting of one accelerates the pressure on the others. Falling real estate prices undermine consumer spending. Falling stock prices erode retirement savings and corporate financing. Falling bond prices increase borrowing costs for both government and private sector. This is not a linear series of events; it is a cascading failure model leading to a ‘triple market crash’.

The U.S. debt spiral amplifies the fragility. When the government’s fiscal position deteriorates, it undermines confidence in Treasuries. When Treasuries weaken, interest rates rise. When interest rates rise, housing buckles and stocks crack. When those markets falter, economic contraction accelerates, reducing tax revenues and worsening deficits. The doom loop tightens.

This is why the current environment feels like the late 1970s, the late 1990s, and 2007 all at once – but with more leverage, less resilience, and no political capacity to respond.

Political Paralysis and the Drift Toward a Failed-State Trajectory

One of the most disturbing aspects of the U.S. debt spiral is that it is not occurring in a vacuum. It is happening in a nation torn by political polarization, institutional erosion, and a loss of civic cohesion. Rubino’s point about the U.S. morphing into a de facto failed state is not hyperbolic. A failed state is not defined by images of coups or collapsed governments. It is defined by a government that cannot perform its basic functions without extraordinary monetary manipulation.

Today, the U.S. government cannot finance itself without continuous intervention from its central bank.

It cannot pass budgets, reduce spending, or reform entitlements.
It cannot sustain military commitments without deficit financing.
It cannot maintain infrastructure, ensure border security, or manage social disorder without escalating fiscal strain.

This is the anatomy of a failing state: not the absence of institutions, but their degradation and dependency.

The political system has devolved into a symbiosis of spending addiction and monetary rescue. Every election cycle promises more benefits, more subsidies, more programs, more defense spending, and more entitlements. The idea of sacrifice or fiscal discipline is treated as political suicide. Voters demand what the government cannot deliver without borrowing. Politicians deliver it anyway.

This is how great nations decay – not through a single dramatic collapse, but through steady fiscal rot that eventually reaches a breaking point.

The Probable Endgame: Inflation, Devaluation, and a Controlled Demolition

The West is approaching its monetary endgame. The U.S. debt spiral guarantees that the government will resort to inflationary finance as its primary tool. When debt becomes unpayable, it is inflated away. This has been the pattern throughout monetary history, from ancient Rome to Weimar Germany to more modern case studies like Argentina.

The U.S. will not default explicitly. It will default implicitly through currency debasement.

This is the only politically acceptable path. It allows policymakers to avoid accountability. It allows the political system to continue promising the impossible. It allows asset prices to be propped up, at least nominally, even as real purchasing power collapses.

But inflation is not a painless escape route. Once confidence erodes, inflation becomes reflexive. People rush to spend money quickly, accelerating velocity. Foreign holders of dollars seek alternatives. Domestic savers lose faith in the banking system. And the government, desperate to avoid a liquidity crisis, increases spending and intensifies its interventions.

Rubino’s insights capture this dynamic well: once you enter the spiral, the system locks into its trajectory. The exit doors close.

The only question is whether the outcome is a slow grinding decline; like Britain after World War II, or a sharp dislocation triggered by a loss of confidence in Treasuries. Given the scale of U.S. obligations and the fragility of its political system, the latter now appears more likely.

Conclusion: Preparing for the Unavoidable Reset

The U.S. debt spiral is not a theoretical concept. It is a lived reality visible in every Treasury auction, every budget negotiation, and every inflation print. The fiscal doom loop is tightening, and the political system is incapable of reversing it. The bubbles in stocks, bonds, and real estate (once signs of American prosperity) are now vulnerabilities that will amplify the impact of the coming correction.

This is not a normal business cycle that can be papered over. It is the culmination of fifty years of monetary drift since 1971, during which money became untethered from discipline, and debt became the foundation of economic policy. The reckoning will not be pleasant. But it is necessary. A system built on leverage, denial, and political dysfunction cannot endure indefinitely.

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