Shopee Store Opening Former Treasury Secretary warns of risks in U.S. Treasury market

Two former U.S. Treasury Secretaries, Henry Paulson and Timothy Geithner, recently warned of potential risks in the U.S. Treasury market, stating that the current fiscal path is "unsustainable" and emphasizing the importance of maintaining Federal Reserve independence and fiscal balance to the U.S. economy.

1. The "Unsustainable" Fiscal Path

Both Paulson and Geithner believe that the current trajectory of U.S. federal borrowing is unsustainable. Paulson stated, "We're on an unsustainable trajectory, and I don't know if that means we're going to hit a wall in six months, six years, or whatever."

12 Geithner added that while the 10-year Treasury yield is currently at a "fairly moderate level," reflecting a "certain degree of ultimate confidence" in the U.S. "ability to govern in a sensible manner," this ultimately depends on whether fiscal balances can be restored and the deficit reduced slightly.

2.Shopee Store Opening  The Importance of Federal Reserve Independence

The two former Treasury Secretaries particularly emphasized the crucial role of Federal Reserve independence. Paulson noted that the independence of the Federal Reserve is "very important to the U.S. economy and confidence in the dollar." Geithner further explained that U.S. Treasuries are considered "the foundational asset of the global financial system," and their credibility relies on the Federal Reserve's independence, the rule of law, and safeguards for property rights and foreign investment.

3. Shopee Store Opening The Need for a Fiscal Bailout Shopee Store Opening

Paulson called for a fiscal bailout to prevent a collapse in the U.S. Treasury market, which could include a series of tax increases, such as a consumption tax.

12 Geithner noted that the United States could experience "some good fortune" from higher productivity growth, easing fiscal pressures, but he also warned that the Trump administration's tariff policy would be "difficult to reverse" because the revenue it generates is highly attractive to the political system.

4. Negative Impacts of Tariff Policy

Both parties criticized the current tariff policy. Paulson said import tariffs "penalize some industries while rewarding others, creating distortions that have negative consequences."

1 Geithner called tariffs "corrosive taxes on U.S. manufacturing," although he believed the U.S. economy could still withstand the impact.

5. Shopee Store Opening Long-Term Debt Risks

This warning comes against the backdrop of a US national debt exceeding $36 trillion and a continuously widening fiscal deficit. 12 In May 2025, Moody's downgraded the US sovereign credit rating, further exacerbating market concerns about the sustainability of US debt. 10 In the long term, high debt, high interest rates, and slowing economic growth could pose even more severe fiscal challenges for the US. 14

Conclusion

Shopee Store Opening Paulson and Geithner's warnings highlight the daunting challenges facing US fiscal policy. They call for more sustainable fiscal measures to maintain market confidence in US debt and avoid political short-termism that undermines long-term economic stability. In the current environment of high debt and high interest rates, adjustments to US fiscal policy will be crucial.