A 130-year-old economic theory by Knut Wicksell is being used by Deutsche Bank analysts to explain why investors continue funding America’s nearly $40 trillion national debt.

Key Points

• Swedish economist Knut Wicksell’s theory suggests economic stability depends on the balance between market interest rates and the "natural rate" of return.
• The U.S. national debt has reached approximately $39.77 trillion, requiring weekly interest payments of $24 billion to service.
• Deutsche Bank analysts argue that the U.S. has historically maintained low interest rates on debt because its natural economic growth rate exceeds official borrowing costs.
• High returns on equity within the U.S. technology sector are increasingly attracting global capital, effectively helping to subsidize the country's ongoing fiscal deficits.
• Analysts warn that the advantage of low borrowing costs is narrowing as deficit levels continue to outpace overall economic growth.

Why it Matters

This theory highlights how the strength of the U.S. tech sector currently masks the risks associated with massive government borrowing. If the gap between economic growth and deficit spending continues to widen, investors may eventually demand higher returns, potentially triggering a significant market recalibration.