Moody's Zandi warns US fiscal preconditions for crisis are falling into place

August 26, 2026 at 04:30 PM1 min

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Moody's Analytics Chief Economist Mark Zandi warned that preconditions for a U.S. economic crisis are falling into place, citing a debt-to-GDP ratio above 100% and a $2 trillion annual deficit. He said an external shock may be needed to force fiscal changes. The warning comes as 30-year Treasury yields rise and the Treasury plans buybacks in early September.

Key Facts

U.S. debt-to-GDP ratio crossed 100% at the end of April, the first time since the post-World War II period when it reached 106%.
The U.S. federal government runs an annual budget deficit of $2 trillion.
The Treasury Department will begin buying back more of its bonds in early September to suppress interest rates.
Zandi said he has never seen such unnerving circumstances converge in his 35-year career.

Fiscal Warning

Mark Zandi, chief economist at Moody's Analytics, said preconditions for a U.S. economic crisis are falling into place. He argued that an external shock may be necessary to force the U.S. political system to address long-term fiscal problems. Zandi pointed to the debt-to-GDP ratio crossing 100% at the end of April as a key indicator. The last time the U.S. reached triple-digit debt-to-GDP was after World War II, at 106%.

Market Pressures

A sell-off in bond markets over the past month pushed yields on the 30-year Treasury bond sharply higher. The Treasury Department plans to buy back more of its bonds starting early September to artificially suppress interest rates. Investors are dumping Treasury bonds to fortify portfolios against risks from the Iran War and growing U.S. debt. Zandi said the $2 trillion annual deficit becomes harder to pay down as interest rates climb.