Summary of Key Points
The scale of U.S. debt is expanding at a much faster rate than the country's economic growth, and conventional methods are no longer effective in addressing the issue. When Trump mentioned using the military to solve the debt problem, he did not mean starting a direct war. Instead, he referred to a modern variant of “military Keynesianism”—using increased military spending to boost the economy and maintain the credibility of the dollar, allowing the U.S. to continue borrowing at low costs. The article compares this to Germany's similar tactics in the 1930s (issuing “Reichsmarks” to secretly print money and using the military to drive the economy, which ultimately led to war). While the U.S. currently has advantages such as dollar hegemony, if this model does not translate into actual increases in productivity, it may fall into a vicious cycle of using new debt to repay old debt.
I. The U.S. Debt Problem: Not Just “Large,” but a “Bottomless Hole”
The problem with U.S. debt is not just its size (currently around $40 trillion) but the rapid rate of growth—expanding at 6%-8% per year, far outpacing the nominal GDP growth rate of about 3%-5%. Even more concerning is the interest expenditure: by 2026, the U.S. will be paying over $1 trillion in interest annually (3.3% of GDP), and this will rise to $2.1 trillion by 2036 (4.6% of GDP). This means that an increasing portion of the government's revenue will be used to pay interest, leaving less money available for other expenditures.
Conventional methods such as bond repurchasing and adjusting the debt structure are ineffective because the debt hole is too large. It’s like owing $1 million with monthly interest of $10,000 when your salary is only $5,000—any repayment plan is futile, and the situation cannot be sustained for long.
II. Trump’s Mention of “Using the Military to Solve Debt”: Not a War, but “Military Keynesianism”
Trump’s statement may sound frightening, but he did not mean using the military to directly seize wealth. Instead, he referred to “military Keynesianism,” where the government uses military spending as an economic stimulus. By purchasing large amounts of weapons and conducting military research and development, it drives factory production and creates jobs. At the same time, the military’s strength is used to maintain the dollar’s global status, encouraging other countries to continue buying U.S. debt.
In simple terms, the military is not used for “seizing” but for “supporting”—supporting the credibility of the dollar and the U.S.’s ability to borrow.
III. The Lessons from Germany in the 1930s: How Military Keynesianism Went Wrong
In 1933, Germany was deeply in debt, and when Hitler came to power, he implemented a novel strategy: issuing “Reichsmarks.” The government placed orders with arms manufacturers, which used these marks to pay suppliers, who then exchanged them for cash from the central bank. This was essentially the central bank secretly printing money, though it was not recorded on the books (as the Reichsmarks were only redeemable after five years).
The short-term effects were positive: from 1933 to 1938, Germany issued 120 trillion Reichsmarks, which were used to build tanks and roads, increasing defense spending from 1% to over 10% of GDP and reducing unemployment from 30% to 2%. The Berlin Olympics appeared to show a prosperous economy. However, the Reichsmarks were essentially hidden debt, and when they became due five years later, Germany was unable to repay them and had to resort to plundering other European countries, leading to World War II and the destruction of Berlin.
The lesson is that military Keynesianism is a form of “overdrawing the future”; if it cannot be supported by actual wealth (such as economic growth or technological breakthroughs), it can lead to extreme consequences.
IV. The U.S.’s Current Approach: A Combination of AI, Military Spending, and Dollar Hegemony
The U.S.’s current strategy is more sophisticated than Germany’s, but the logic is similar:
1. Using Military Spending to Drive the Economy: The 2027 fiscal year defense budget is $1.5 trillion, with significant investments in ships, AI, and drones. For example, the Department of Defense collaborates with tech giants like SpaceX and OpenAI to transform the military into an “AI-driven force,” stimulating demand for semiconductors, rare earths, and robotics.
2. Maintaining Dollar Credibility with Military Power: The dollar is the global reserve currency, and U.S. debt is sold because of the U.S.’s military deterrence—for instance, by controlling global energy routes (such as the Strait of Hormuz) and maritime lanes, forcing other countries to rely on the dollar. As long as the military is strong, the dollar remains stable, and U.S. debt is purchased.
3. Energy and Military Integration: As one of the largest producers of oil and gas, the U.S. uses its energy advantages to create revenue by maintaining shipping routes, ensuring the smooth export of LNG (liquefied natural gas) and thus reinforcing the dollar’s position.
The core of this strategy is using military power as a guarantee to maintain global trust in the dollar and U.S. debt, allowing the U.S. to continue borrowing.
V. Risks: Could This Lead to a Vicious Cycle of Debt?
The key to this model is whether military spending can be transformed into productivity. For example, can AI technology developed for the military be applied in civilian sectors (like how NASA technology contributed to the internet during the Cold War)? Can sales of U.S. weapons to allies increase exports? If these transformations are successful, the U.S. economy will grow, and the debt problem will be alleviated.
However, if the transformations fail, the situation will worsen: more military spending leads to higher debt and interest costs, higher borrowing costs for businesses, and slower economic growth, forcing the issuance of even more debt to repay existing obligations. This would create a vicious cycle of using debt to sustain debt, similar to Germany’s outcome. Although the U.S. may not directly go to war, it could use sanctions and control of global resources to “plunder” wealth, leading to greater conflicts.
In summary, whether the U.S.’s current approach is a temporary solution or a clever strategy depends on whether it can convert military investment into actual economic growth. If not, the “bottomless hole” of debt could drag the U.S. into an even greater crisis.