The numbers come first. The United States carries $39.77 trillion in debt, requiring service payments of $24 billion every week. By any conventional measure, that is a country living beyond its means. Yet investors keep buying. Deutsche Bank thinks it knows why — and the explanation reaches back to a Swedish economist most Americans have never heard of.
Wicksell's Forgotten Idea
In 1898, Knut Wicksell argued that inflation and economic instability arise when market interest rates set by central banks fall out of sync with the 'natural rate of interest' — the return investors can earn by putting capital to work in the broader economy rather than holding cash or bonds. The theory spent a century in relative obscurity. Deutsche Bank's Chief Investment Office believes it is suddenly relevant again.
In a research note, Deutsche Bank's Ulrich Stephan, Dirk Steffen, and Elena Ahonen argue that America's sustained deficits reflect a country 'fundamentally living beyond its means,' but that its role in the international financial system has allowed it to 'enjoy risk-free market interest rates that were below its estimated natural rate of interest.' In plain English: the U.S. economy is productive enough that lenders have not yet demanded a risk premium commensurate with the debt pile.
The Tech Multiplier
What has changed in recent years, the Deutsche team writes, is the source of that productivity advantage. 'The high return on equity available on some U.S. sectors — e.g., tech — is now complementing or, to some degree, supplanting the structural and geopolitical factors which have so far supported inward investment in the U.S. during the post-WW2 period.'
The conclusion is direct: 'You could argue that U.S. deficits are, in effect, being increasingly funded by its tech sector.'
America's dominant position in artificial intelligence and its hyperscaler ecosystem have lifted productivity growth and return on equity to levels that make U.S. assets attractive relative to any competing destination for global capital. That premium keeps borrowing costs contained even as the debt clock spins.
The Loop — and the Risk
The Deutsche team is careful to note the paradox embedded in this dynamic. If the U.S. government pulled back spending on AI, confidence in the sector would erode, undermining the very mechanism that makes deficit financing sustainable. More spending requires more borrowing, which requires the productivity story to keep delivering. 'The U.S. economy can therefore be seen, in some ways, as both a gainer and a victim of its own success,' the team concludes.
That loop has limits. JPMorgan Chase CEO Jamie Dimon has previously warned that a shift in risk perception could trigger a market recalibration. Bridgewater Associates founder Ray Dalio's argument that the U.S. is living beyond its means remains 'fundamentally true,' the Deutsche team acknowledges — even as investors currently appear willing to look past it.
The Market Has Already Voted
For now, capital rewards the American growth story. Free enterprise, technological leadership, and deep capital markets have produced a natural rate of return that keeps the debt machine solvent. That is not a license for unlimited spending — it is a margin of safety that Washington is drawing down week by week at $24 billion a clip. The moment productivity growth stops outrunning deficit expansion, Wicksell's math reasserts itself, and no amount of geopolitical prestige will substitute for a credible balance sheet.
