Starting September 9, the United States government is going to spend money buying up its own debt. The reason is that not enough people want to lend to us anymore.
Most investors panic at news like that. The better question is where the money goes next.
Rates, prices and policy all end up in your budget eventually. Get the free Market Briefs daily newsletter and see it coming.
Why the Government Needs Treasury Bills
The government has one real source of money, and that is taxes.
You pay income tax, plus payroll tax for Medicare and Social Security. Then comes sales tax at the register, property tax if you own a home, and capital gains tax when you sell an investment for a profit.
After that come tariffs, corporate taxes, state and local taxes, and the estate tax if you die rich. Smaller ones sit on top of all of it, on things like alcohol and tolls.
All of it added up to about $5 trillion in 2025. The government spent about $7 trillion, on Social Security, the military, and interest on money it had already borrowed.
That leaves a $2 trillion gap, and the gap gets filled with debt. Do that for enough years and you end up past $40 trillion.
Interest Is Now a Bigger Bill Than the Military
The fastest-growing cost in the federal budget is not the military or veterans benefits. It is interest on the debt, and we now pay more in interest than we spend on the entire military.
Part of that is simply having more debt. The rest goes back to 2020 and 2021, when interest rates were the lowest they had ever been and the government refinanced, just like millions of homeowners did.
It could have locked in 30 years at 2.1%. Instead it took five years at 1.8%, betting that rates would still be low when the loan came due.
About a third of the national debt resets in 2026. It is not resetting at 1.8%, or at 3% or 4% either.
The Three Lenders Walking Away
Three groups lend the government money, and all three are backing off.
| Lender | Who | What changed |
|---|---|---|
| Private investors | People like you buying a Treasury | Nervous about inflation over 30 years |
| Institutions | Banks, pension funds, hedge funds | Can only buy so much |
| Foreign countries | Japan, the U.K., China | China went from top lender to seller |
A Treasury is just a loan to the government. You hand over money, and they pay you back with interest.
Plenty of investors now look at a 30-year loan paying 4% or 5% and pass. Nobody knows what a dollar will be worth in 2056.
When lenders leave, the government has to pay more to bring them back. That is why treasury rates today sit near the highest levels in decades, and why the bond market has seen its worst chaos in a generation.
The trap is that paying more to borrow makes the debt more expensive to carry.
How Treasury Bills Became the Escape Hatch
So the Treasury got creative. If we cannot find lenders, the thinking goes, we will become our own.
The program is called nominal long and liquidity support buybacks. In plain English, the government is getting a new Amex to pay off its Visa.
Not all government debt is the same. Short-term debt runs about one to five years, and those are the treasury bills, while long-term debt is the 30-year.
Demand for the short end held up. Demand for the 30-year disappeared, which is why long-term rates went vertical.
So the plan is to sell more treasury bills and use that cash to buy back the 30-year debt. Just announcing it calmed rates a little, because the market suddenly had a new buyer to count on.
Crypto Companies Are Now the Biggest Treasury Bill Buyers
There is a second reason short-term demand held up, and it is written into law.
A year ago the government passed the Genius Act. It requires stablecoin companies to back their coins one-to-one with U.S. dollars.
A stablecoin is a crypto token built to always be worth about a dollar. So a company holding $1 billion of them has to buy $1 billion of U.S. debt, mostly short-term.
The biggest and fastest-growing lender to the U.S. government is not you, and it is not banks, foreign countries, or even the Federal Reserve. It is crypto companies, and Tether is now among the largest owners of U.S. debt in the world.
The White House says the Genius Act is a way to keep the dollar as the world's main currency. That matters because the dollar is not backed by gold or any metal, only by faith and promise.
New crypto rules just turned a large group of buyers into required ones.
Someone Still Has to Print the Money
The government does not have spare cash. If it did, we would not be $40 trillion in debt.
So part of this comes from the Federal Reserve, which can create money out of thin air and lend it to the government.
The Fed is not really a bank, since you cannot walk in and make a deposit. It is not sitting on cash reserves, and its own website says it is not federal.
This has been going on for decades. Every round of new money makes each existing dollar worth less, which pushes prices up and shrinks what your paycheck and your savings can buy.
It also answers a question people ask all the time. If the government can simply print, why do we pay taxes?
Because printing without taxing creates the kind of inflation we are still cleaning up from the pandemic.
The Government Is Addicted to Spending
So why not just spend less?
Our whole economy runs on spending. Spend a dollar at Chipotle and that dollar pays the workers, the rent, and the food.
Walk out without buying anything, and Chipotle cannot open more stores or keep the lights on.
The biggest spender in the economy is not you, and it is not Nvidia or Tesla. It is the government.
GDP is all the spending in the economy, and government spending counts in it. Ours runs about $30 trillion, so cutting $2 trillion would shrink the economy by about 6.5%.
The 2008 crash saw GDP fall about 4.5%. That brought foreclosures, bankruptcies, and brutal unemployment across the country.
A 6.5% drop would be roughly 50% worse, and no president wants that happening on their watch.
Ray Dalio, who built the biggest hedge fund in the world, calls where this ends the debt death spiral. Nobody knows the timing.
Why Treasury Bill Rates Set Your Mortgage Rate
You may never buy a Treasury, but this still reaches your wallet.
Any finance textbook will tell you U.S. debt is the safest investment on earth. It gets called risk-free because the government is the least likely borrower to miss a payment, since it can always raise taxes or have the Fed print.
Now think like a bank. You walk into Chase asking for a loan, and the bank has a choice: lend to you, or lend to the U.S. government.
You could lose your job and stop paying. The government will not.
The riskier borrower pays more, so when government rates rise, yours rises with them:
- Mortgage rates
- Car loans
- Credit cards
- Business loans
It works in reverse too, which is the real point of the buyback. The goal is to push rates down, not to 3% or 4% but at least steadier.
Cheaper rates also make that third of the debt resetting in 2026 cheaper to carry.
Where the Money Goes Next
Anytime money moves, somebody gets richer. The average person gets emotional about it, while the minority asks where the money is going.
We just watched that play out. A new Fed chairman was expected to keep printing and keep cutting, but instead he said the plan was to save the dollar and hold rates higher for longer.
Higher rates are good for the dollar and bad for the assets investors buy when they are scared of it. Bitcoin got crushed along with gold and silver, falling from around $120,000 a coin to roughly $60,000.
Then the buyback landed, and Bitcoin rallied harder than it had in years.
Here is where investors are looking now.
| Approach | What it targets | What to know |
|---|---|---|
| Short-term Treasury ETFs (SGOV) | Interest if rates stay high | Not a bank, not FDIC insured |
| Gold, Bitcoin, silver | Dollar fears | Nothing goes straight up |
| S&P 500 funds | The broad economy | Buying on a schedule is the system |
| Real estate funds | A hard asset that pays cash flow | Inflation pushes real assets up |
Treasury bills through an ETF. ETFs like SGOV hold short-term Treasuries for you. It is not a bank and not FDIC insured, but the price stays fairly steady and the debt behind it is backed by the Treasury. A default is possible but not likely, and it would create problems far bigger than your account balance. For high earners in high-tax states, there is an extra perk: the interest is usually tax free at the state and local level.
Gold, Bitcoin, and silver. These attract money when investors get nervous about the dollar. Silver is the odd one out, because factories use it too, so it swings harder than the other two. Bitcoin trades a lot like a tech stock, and investors who chase any of them can get hurt.
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Real estate. Real estate is a hard asset that produces cash flow, and inflation helps it. Look at home values over the last five or six years. Houses did not get more useful, but the dollars pricing them got weaker.
What to Watch on Treasury Bills
Watch whether long-term rates actually come down once the buying starts. That is the real test of whether this works.
Then watch how much of the money comes from the Fed, because that is the part that shows up in prices later.
The government found itself a new lender, and it happens to be itself.
Education, not investment advice. Investing has risks and you will lose money at some point, so do your own due diligence.
