US debt hit an eye watering $36 trillion earlier in 2025. That’s 12 zeros! President Trump, his officials and swathes of economic commentators agree something needs to be done to reduce the debt burden. It is the economic elephant in the room. However, this is a problem of gargantuan proportions, and no politician has so far offered a credible strategy.
We tackled this subject last year in an article titled How Big is Your Debt Mountain? For background reading, follow the link how big is your debt mountain . We set out the impacts of inflation and how this can erode the real debt burden but it also inflicts pain on the innocents and likely leads to changes of leadership and governments. Indeed, this came to pass in America. We also discussed the impact of currency debasement on debt mountains and the links with investment portfolio performance. Further inspiration for our latest article has been drawn from various publications, interviews and white papers written about US debt management.
President Trump should be taken seriously, though not always literally in our opinion. His strategy is to threaten and use trade tariffs to provoke a deal which suits his America First agenda. We also believe the Trump 2.0 years (his final Presidential appearance) will be used to create a legacy and a lasting imprint on history – such is the ego and ambition of the man. The potential to fix the American debt burden, and therefore to broaden and deepen the US hegemony over other nations, will prove tantalising. His stated ambition to create a new External Revenue Service to complement the existing Internal Revenue Service (the US’s HMRC equivalent) is notable. How can he achieve this goal?
President Trump and his senior team plan to monetise American assets. The biggest asset
is the US military.
Recently, President Trump signed an executive order to establish a U.S. sovereign wealth fund. This fund aims to monetise U.S. assets, such as gold reserves and potentially Bitcoin, to create significant financial assets for the country. We observe there are no debtor nations with sovereign wealth funds. The United States is today the single biggest debtor nation in the history of the modern world. So, we contend a clear plan must be afoot.
The President has been critical of the long-standing security arrangements where the U.S. provides military protection without direct compensation. He suggested on 23rd January 2025, in a video speech to delegates at Davos, that NATO countries should increase their defence spending and possibly engage in debt swaps to compensate for past security support. The establishment of debt swaps offers a clear insight to his ambition. Further clues have been dropped by Scott Bessent, Chief Secretary to the Treasury. Towards the end of the last Trump Presidency clues were also evident from officials, such as Treasury Secretary Steve Mnuchin, who stated NATO and other countries need to pay for the security afforded by the United States over the past several decades. What form could these payments take, and how can this strategy to make nations pay be linked to the erosion of America’s debt mountain, the ability to cut taxes at home and cementing the U.S. as top dog — or if you prefer, primus inter pares — on the global stage?
Source: Peter G. Peterson Foundation
The first measure to cut the deficit is already up and running. President Trump’s creation of the Department for Government Efficiency (DOGE), headed by Elon Musk, is tasked with saving $1 trillion. Automation, digitisation and cutting duplication from the ‘government machine’ and civil service is a key ambition and popular with the electorate.
‘Tariff’ is allegedly Donald Trump’s favourite word. Using the spectre of tariffs creates a disturbance but the imposition will certainly swell coffers for the so-called External Revenue Service. Although American consumers and business will be the physical payee. On February 1 2025, President Trump signed three executive orders imposing new tariffs on goods from China, Canada, and Mexico. The Committee for a Responsible Federal Budget estimate that this tariff will alone raise $200 billion through Fiscal Year 2035. This is before other tariffs are imposed on the EU and other nations.
A sovereign wealth fund (SWF) is a state-owned investment fund that invests in various financial assets like stocks, bonds, real estate, precious metals, and alternative investments such as private equity funds or hedge funds. Nations such Norway and the UAE operate SWFs. SWFs are usually funded by revenues from commodity exports (like oil) or from foreign exchange reserves held by the central bank. In the case of the U.S., the fund could be backed by assets such as gold reserves and potentially Bitcoin. The primary goal of an SWF is to generate wealth for future generations and stabilise the country's economy through diversification. This involves investing in a mix of domestic and international assets to achieve long-term returns.
The United States has seized and notionally owns $12 billion of Bitcoin. These assets currently sit in the Justice Department and the President has earmarked them and other crypto currency holdings as a strategic reserve – an allocation to an American SWF.
The US Treasury owns significant gold reserves valued at least $800-900 billion which could be held in a SWF.
In America, the super-popular social media platform Tik-Tok has been offered for sale by its Chinese owners rather than being outlawed by regulation. For example, this entity could be acquired by the SWF and held as an appreciating and income generating asset. President Trump already remarked this could be possible. Likewise, holdings can be taken in other listed companies for the same purpose, akin to other SWFs around the world.
The largest potential contributor to the External Revenue Service and contributor to the American SWF could come from President Trump’s proposal to charge foreign nations for provision of military support. President Trump's plan to charge for military support involves several key components aimed at shifting the financial burden of U.S. military assistance to the countries receiving it. Trump proposes that allied nations contribute more financially to the cost of U.S. military presence and operations in their regions. This includes both direct payments and increased spending on their own defence capabilities. The plan includes renegotiating existing defence contracts to ensure that the U.S. is not disproportionately bearing the costs of international security. Encouraging allied nations to purchase more U.S. military equipment and technology as part of their increased financial contributions. In cases where countries are unwilling or unable to meet the new financial requirements, the U.S. may reduce its military presence or withdraw entirely. In the event a nation declines to pay for effective protection, the risk is China or Russia offer a similar or worse deal with more strings attached, and the United States levies a hefty tariff on every product manufactured by the nay-saying nation.
A possible structure could be the issuance of zero-yielding, long-dated or perpetual Treasury Bonds bought by nations. Full liquidity and an interest-bearing loan facility to be offered by the US Federal Reserve to nations buying the US debt instrument. One likely positive side effect would be a reduction in the value of the dollar. A positive benefit to all global nations, as well as helping US exporters. Of course, the US Federal Reserve would need to agree with the strategy and discussions are underway according to commentators.
We believe President Trump’s plans to resolve the gargantuan debt issues align with his bold approach to negotiation and problem solving. We see a possible Mar-a-Lago Accord on a par with other momentous agreements such as the Plaza agreement, Bretton Woods or closing the gold window in 1971 for example. Donald Trump is undeniably thinking very big – he has already sown seeds for reestablishing ownership of the Panama Canal, consuming Canada and buying Greenland! Fixing the $36 trillion debt burden would certainly require thinking and implementation on a very, very large scale.