The U.S. is entering a "debt spiral," said macro strategist Lyn Alden, who warned that rising deficits, interest costs and protectionist trade policies are structurally embedding long-term fiscal instability into the global economy.

“There’s no will to control it, and that’s not an accident, that’s the way the system is designed,” she said.



The Lyn Alden Investment Strategy founder said the U.S. federal deficit, now above 7% of GDP, combined with soaring interest payments, is creating a feedback loop that could destabilize asset markets and investor confidence. “They’re not going to fix this anytime soon, that’s just the way it works,” she said.

Net interest payments on the federal debt now exceed defense spending and are on track to exceed $1.2 trillion this fiscal year, according to the U.S. Treasury Department, while Congressional Budget Office (CBO) forecasts confirm that structural deficits will persist over the next decade even under an optimistic growth scenario.

While fiscal dominance has been a long-term theme, Alden said tariffs are now acting as a catalyst.

“Tariffs are one of the most important things going on right now, they’re inflationary, they’re depressing real economic activity, so they reduce real GDP, they reduce real tax revenues, they raise prices,” she said. “When the government fills the gap by printing money, you get a feedback loop.”

President Trump has said he may raise tariffs as high as 60% on the Asian giant and other trading partners, while Biden-era tariffs on strategic metals remain in place. Inflation data released this week showed the CPI remained above 3% in June, with services and goods categories remaining sticky, especially housing and transportation.

Alden warned that tariffs create "a way to push up inflation and pressures that exacerbate fiscal dominance."

Alden reiterated her long-standing warning that bonds are in for a secular decline. “In 2019 I said the bond bubble was unsustainable because the math doesn’t lie,” she said. “Now we’re seeing that the losses are permanent, the risk is asymmetric, and you can’t work your way through this on your own.” Instead, she recommended that investors consider a portfolio based in real assets as well as shorter-dated exposure. “Cash can work in the short term, but if you don’t rotate, you’re going to bleed.”

Asked what investors should learn from the current environment, she was blunt: “We are in fiscal dominance. The system is set up this way, and the incentives are misaligned. If you’re waiting for normalcy to return, you’re going to be waiting a long time.”