Should you be worried about the United States carrying roughly $40 trillion in federal debt? Darryl Lyons, CEO and co-founder of PAX Financial Group, breaks down what the national debt means, why it matters, and what could ultimately force Washington to take action.
Darryl explains the difference between federal debt and the annual deficit, who actually owns U.S. debt, and why foreign investors continue to purchase U.S. Treasuries despite growing concerns about government spending. He also shares a personal story about his own experience with debt early in his career and the lessons it taught him about controlling spending and increasing income.
The conversation also explores whether investors are losing confidence in U.S. Treasuries, how the 30-year Treasury rate can serve as a measure of investor confidence, and what a changing debt environment could mean for portfolio diversification. Rather than encouraging investors to panic, Darryl emphasizes staying informed, reviewing your investment strategy, and thinking long term.
YOU’LL LEARN:
• The difference between federal debt and the annual deficit
• Who owns U.S. government debt
• Why foreign investors continue to buy U.S. Treasuries
• What could force Washington to address the national debt
• How Treasury rates can signal changing investor confidence
• Why portfolio diversification may require more creativity
• How to respond to economic concerns without making emotional investment decisions
This episode is for investors, retirees, and anyone who wants a clearer understanding of how the national debt could affect the economy and their financial future. As always, Darryl encourages listeners to use this conversation as a starting point and discuss their individual circumstances with a trusted financial professional.
Benefiting from the show? We’d appreciate it if you left a review on your favorite podcast platform.
Transcript:
We have $40 trillion in debt. This very real and the interest continues to climb. This a problem that you cannot sugarcoat. You cannot sugarcoat.
I do want to highlight something that I think is worth knowing that nearly half of 40 trillion is held by you and me,
Hey, this Darryl Lyons, CEO and co-founder of PAX Financial Group. And you’re listening to PIVOT with Darryl Lyons. We’re going to talk about wealth, life and leadership. Remember, this information is general in nature only. It’s not intended to provide specific investment, tax or legal advice. Visit PAX Financial Group for more information and consider this the beginning of a conversation.
Because really good, solid, wise money decisions really happen in a dialogue. So this is the beginning of your dialogue, hopefully with an advisor or a friend or somebody you trust. I just say that because this I can’t cover the scope of the content in 15 to 20 minutes, because there’s so many different tentacles to every single topic today. So that’s why I want to encourage you to continue, talking through this stuff. So the pondering with PAX question is about federal debt, and I’m actually going to do the whole podcast on it. And the question really was, which was on social media, again, send me your questions. You can email me your questions if you like. Darryl@paxfg.com.
The question is, is with federal debt so high, 40 trillion, should I be worried? That is a podcast that I’m going to do right now. I want to unpack it and let’s let’s talk about that in four different, five different segments. I want to talk about why this matters. Number one. Number two, I want to share just a little bit about my personal debt experience. I’m going to be transparent and vulnerable there. Three I want to talk about what could force Washington to act. So that’s three. Number four, I want to talk about whether or not investors are losing confidence. And then number five, I always want to bring it out. Bring it back on what we can do, what we can control and how we should behave.
So let’s unpack this in this brief segment today, because it’s an important one and it’s one that we should be nervous about. I do not want to sugarcoat this. I was thinking about sugar coating. I was like, I don’t want to sugarcoat this conversation. People want me to be real. I was thinking, I don’t know why I thought I thought about this the time I put brown sugar in green beans. I was making green beans. I don’t know what. Maybe we had some friends over and I put brown sugar in it. I don’t know why, but it did not turn out good. So don’t put brown sugar in green beans. Now, green beans can do pretty. You can be pretty creative, right. Like I you got to put bacon in it. Bacon’s the pixie dust for all things food and garlic and maybe salsa. Saute some onions and pepper and, you know, make some good Texan green beans but not brown sugar. It just doesn’t work. So I’m not going to sugarcoat my green beans. I’m not going to sugarcoat this conversation. $40 trillion in debt is a lot of debt. And it’s ridiculous. It’s stupid. I can’t believe we’re here. And then you have this idea of a deficit. Don’t get those two words confused. Deficit means that you just don’t have enough money to pay all your bills. And so those are two words that are used interchangeably. Make sure you know when you hear them. The difference debt and deficit deficit. And another way to look at this like for every $5 we make as a country, make the way a country makes money as they tax us for every $5 they make, a dollar goes to pay the debt. That’s the deficit, generally speaking. But we have $40 trillion in debt. This very real and the interest continues to climb. This a problem that you cannot sugarcoat. You cannot sugarcoat.
I do want to highlight something that I think is worth knowing about, that nearly half of that 40 trillion is held by you and me, nearly half about 18 trillion of the 40 trillion held by you and me. The when I say you and me is if you look in your investment portfolio and you have bonds, a lot of the bond managers hold US treasuries and that’s debt. So the US government owes you and me. That is a positive spin because it’s a it’s a more symbiotic relationship when it’s held by you and me. We’re not going to completely sell everything overnight to undermine our own country.
Now you and I have we do have control over our money, certainly. But don’t forget, there’s also usually a fund manager that’s responsible for knowing what specific types of US treasuries to put into a bond fund. That specific manager has a lot of power. In fact, I know one of those managers, he was actually he has so much power to influence the United States government. They actually considered this person to be a Federal Reserve chairman. So the power of us collectively owning bond funds and having a manager responsible for for owning those bond funds, actually has more influence in the federal government’s decision than we know. That’s a very technical thing to discuss. But my my bigger point is, is that we collectively still own a lot of the United States debt. And so we collectively, including the influence of these bond managers, aren’t overnight going to do something to completely disrupt the whole system. It would hurt all of us. But that doesn’t mean that there’s not a group of people that don’t own. There’s a group of people outside of the US that own their foreign bondholders. I think I’ve, I think I’ve got if not, I know on my head. Yeah. Let me you know what, I’ll talk about the foreign bondholders in just a second. But but just to know $40 trillion in debt, it’s important for you to know $40 trillion in debt, nearly a $2 trillion deficit. And a good chunk of that debt is owned by you and me. So once you want to kind of give you the lay of the land right now, now, let me talk about number two.
This my own personal situation. A little bit vulnerable here. Kind of embarrassing, frankly. But when I first started in the business as a financial advisor, I didn’t know people with money. I knew people in trailer parks. I knew people were broke. I knew people were college. I did not know people with money. So to be a financial advisor, it’s probably a good idea. You know, people with money. I just didn’t know anyone. So I have my newborn Luke in my wife and I am not making any money. I’m broke. And the only way we’re surviving is I get a little. I get little checks in the mail. This embarrassing. Called cash advance checks. My mortgage is due, and I have to write a cash advance check, put it in my bank account. So that way the mortgage payment would clear on the third or the first. That’s embarrassing. Being a financial, a financial advisor is like being a shop teacher with no fingers. Not only is it embarrassing for me to say this today, but at the time it’s demoralizing because you lose a lot of confidence in your ability to help people make financial decisions, knowing internally you’re struggling.
But here’s the point I want to make what is my solution? I think my situation is very applicable. What is my solution in that situation? First of all, I’m scared. What is my solution? My solution, first of all, is to ensure that the spending is under control, that if we are eating out, it’s rare, if at all. In fact, many times we wouldn’t go eat out. We’d go to her parents and they would cook us dinner. So control the spending. Control the spending was the priority for our family. What’s the other way to pay down debt? The problem is, is I just didn’t have enough cash flow to pay down the debt. So this the other solution. And I think is really the most realistic one. It’s not it can’t be done in isolation because you’ve got to control the spending. But I had to make more money. That was it. I just had to make more money. So
I say that because I do have conviction that our pathway to get out of this to make more money as a country, to grow the country. I’ve heard the president speak about this a little bit more. It doesn’t always land politically because there’s holes in it. And I think done in isolation of controlled spending is problematic and and frankly, not possible. But with controlled spending coupled with an improved outcome in the top line of the revenue, that is our pathway out. And frankly, today that’s the pathway out for me. I, of course, made more money over time and was able to resolve that. But for a while my debt was equal to my income. Really troubling, really problematic. Had to stop spending, but I ended up making more money and ended up getting out of that mess. Praise God!
The third thing I want to mention is, is there a day of reckoning? I’m sorry. Yeah, that’s the third thing I want to talk about. And I want to talk about this. Like what would force Washington to get their act together? A day of reckoning would mean that. Remember I talked to you about just a minute ago that a big chunk of our debt is owned by you and me.
But I think it’s also important to know that there’s foreign owners of our debt, a big concern, rightfully so, is that all of a sudden, overnight, some country called China or Japan is going to say, we’re out and they sell everything. I will tell you this. That doesn’t seem to be probable. I will say China has orderly reduced. And this all you can look this up, orderly, reduce the amount of debt they’ve owned in the United States over the last several years. So they are unwinding. They’re just doing it in orderly way. Outside of China, foreign buyers of debt has actually increased. So right now the evidence is that foreign buyers continue to have an appetite for our debt, regardless of the situation that we’re in.
Interestingly enough, why would they possibly want our debt? Why? One, it’s paying a nice interest rate. Two. It’s still the cleanest, cleanest sheet in a dirty load of laundry. We’re still functioning relative to other governments. Better. I mean, I know it’s clunky, but would you rather own debt in France? Would you rather own debt in India? Would you rather own debt in Japan? Would you rather own debt in Canada or Mexico? No. So as far as all the alternatives, the foreign governments with their pensions or with their reserves, they’re still buying U.S. debt.
They are. Let me tell you this again. They’re still buying U.S. debt. China? No other countries? Yes. For that reason, in terms of forcing Washington to act, you’d have to see something really egregious happen where these foreign owners of debt acted in unison and collapse the economy, which would collapse the world, which is not likely to happen, but threats of that should force Washington to move. But that threat not being imminent causes them to not have any political will to do what needs to be done, which is reduce spending. The problem with reduced spending right now is, you know, you’re going to politically, it’s challenging. What are you going to do reduce the defense budget. It has some problems. What about infrastructure roads, bridges. What about Medicaid or Medicare? Or alternatively, you could you could have higher taxes. But even then, I mean, even then, you could tax all the billionaires 100% of their income and it still wouldn’t make a dent. You can do the math, go do the math, or, you know, Google it or ChatGPT. You could take all the money from the billionaires and it doesn’t make a difference. So higher taxes, I guess I have always and I’ve talked about this before, the Fair tax, which is a national sales tax to replace the income taxes and interesting consideration. But the threat is, is you add a fair tax, this national sales tax, and you add and you keep the income tax which may end up being where we go. So all of these are on the table. But nothing’s like really urgent because the threat of all the foreign buyers abandoning the debt is not imminent. So if there’s no imminent threat, then complacency continues to be the default. And the lack of political will, despite the arithmetic, isn’t moving the needle for somebody to make tough, tough decisions. So The fourth piece, I want to make, the fourth point, which I kind of already made, is our investors losing confidence in the U.S. Treasury debt.
And like I said, the foreign buyers aren’t sweating it. In fact, the foreign investors have about 9 trillion of treasuries. And this as of a June 2026. But that’s $200 billion more than they did last year. So significant amount. So again, investors globally aren’t losing confidence in us. U.S. investors are not abandoning it. I’m not having anybody say, hey, take US treasuries out of my portfolio. Most people get concerned about corporate bonds before they get concerned about US treasuries. So there’s no mass exodus. So the idea of the loss of confidence is not there.
Now what’s interesting to note is that there is a confidence meter. And that’s the 30 year treasury rate. And that rate hovers. Let me see if I have the latest here. Round 5% I might I don’t know if I have the latest in front of me, but around 5%. So if you see that let’s say it spikes. It doesn’t spike. But if it were to spike to 8%, that would be a a barometer that the temperature of the debt holders has changed and the U.S. has to pay people a lot more to earn their trust, to earn their business. The U.S. Treasury Scott Bessent has done some recent maneuvering to try to keep that that number down, that 30 year Treasury number. So it is a priority of the federal government to keep that number down, but also to attract investors or people to lend money to the United States. So it’s a it’s a game that’s played all the time. But if you pay attention to that 30 year Treasury, that’s kind of the barometer for the appetite in the marketplace. And yes, it’s going to go up if we continue to issue more debt, it’s just going to be a slow expectation of people saying, look, I will lend the U.S. government money, but I’m no longer willing to lend it to you unless I get paid a little bit more, because the risk profile of the United States is going up.
The last thing I want to mention is how do we how do we deal with this? And. I guess, you know, it’s a tricky thing because I want you to be on point, but I don’t want you to worry. Typically, if you have an investment portfolio, you’re going to have bonds. Now at PAX we tend to our default is to a little less bonds than what an average advisor might recommend because of this looming issue. And where do you go as an alternative to bonds? You’ve got cash, you’ve got commodities, you’ve got some different foreign currencies. So diversification. So here’s what I would say. Diversification outside of individual stocks requires a little bit more creativity going forward. Let me say that again diversification outside of just U.S. stocks which is traditionally in 1980. It was stocks and bonds going forward. Diversification outside of U.S. stocks also called equities requires a little bit more creativity. It’s going to require a consideration of foreign bonds. It’s going to require consideration of some commodities some currencies. And I think collectively we’re going to have to accept the fact that there’s going to be a different profile of our investments going forward. That won’t be traditional 70% stocks, 30% bonds. It’s going to be something different. And that’s okay. But just know that this a conversation between you and your advisor to ensure that that mix, that recipe is aligned with your risk profile. Because even if you do add, let’s say, gold, it’s not as though gold doesn’t come with its own set of risks. And it’s okay. You just have to know that that that risk is in there.
So I think going forward we pay attention.
So here’s how I would say this. Going forward, as we pay attention to this debt issue, we have to make sure that our investment portfolio is well diversified. And we whether the rhetoric. So the rhetoric ebbs and flows. Sometimes the rhetoric happens in waves. For example, the these third party rating agencies and best and standard, Standard & Poor’s, they’ll come out and they’ll have commentary or they’ll readjust the credit worthiness of the United States debt. That rhetoric that will hit the headlines will scare all of us, and it will cause us to pause. I want you to be in front of that and just work with your advisor to make sure that your what traditionally, bond portfolio is well diversified, well managed. You understand the risk profile and you maybe you’ve even cut some of the bond positions and added some commodities or currencies or some other things in there. So that way it’s well diversified to weather some of those ups and downs.
But overall I don’t have any major like I’m not going to tell you to do anything different. I think it’d be foolish for us to react. I would say that your concern is it has merit. It’s concerning for all of us who have worked hard.
I mean, many of us, you and I probably share a story about being in debt and climbing out of it. And we remember how that feels, and we don’t want us to ever have to go back there again, nor our kids, nor the next generation, nor our country. So the concern is real. But let that concern not be action.
Let it be a signal. Let it be a signal for you just to review your investments. And I want to leave you with that. Again, a lot to unpack here. I hope these takeaways are enough for you to say, okay, I kind of get it now, and I think I’d like to double click on my saying, as I always remind you, you think different when you think long term. Have a great day.
Resources:
Mark Zandi Says America May Need A Crisis Before It Fixes Its Debt Problem | The WealthAdvisor
Top 15 Largest US Treasury Holders in 2026: Who Owns America’s Debt?
Who Owns U.S. Debt? A Simple Breakdown of America’s $39 Trillion Debt
What Would It Take to Balance the Budget? An Update-2023-02-24
The Rich Aren’t Rich Enough to Balance the Federal Budget
Listen on:
