In a recent press conference en route to the Super Bowl, former President Donald Trump made remarks suggesting the possibility of selective default on U.S. debt, triggering market concerns about the creditworthiness of U.S. government bonds. At the same time, Elon Musk’s increased influence over the government’s financial system has raised further worries about global economic stability.
Trump stated:
“We are even looking into the national debt… There might be issues there… A lot of things may not count.”
His comments implied that granting Musk’s "Department of Government Efficiency" (DOGE) access to U.S. Treasury data could lead to a cost-cutting strategy—defaulting on certain U.S. debt obligations, a move economists classify as "selective default."
While Trump’s economic advisor Kevin Hassett later attempted to clarify that these remarks referred to other government expenses rather than the $36 trillion national debt, the damage had already been done.
Even a partial default on U.S. Treasury bonds could have catastrophic financial consequences. As the U.S. dollar remains the world’s primary reserve currency, Treasury yields (the interest rates on U.S. government bonds) serve as a benchmark for global financial markets.
If investors begin demanding higher yields to compensate for the risk of not being repaid, the ripple effects would impact trillions of dollars worth of assets worldwide—many of which are priced based on the perceived stability of U.S. Treasuries.
Although Treasury Secretary Scott Bessent assured that the administration aims to lower 10-year bond yields, Musk's aggressive intervention in government financial systems has already led to disruptions.
The U.S. government's credibility in global financial markets is eroding as Musk consolidates control over financial systems. Several alarming incidents have emerged:
This aggressive cost-cutting, described by Wired Magazine’s Brian Barrett as “placing the U.S. inside a private equity-style austerity machine”, is undermining long-term trust in American institutions.
In a New York Times op-ed, five former U.S. Treasury secretaries warned that Musk’s unchecked influence over fiscal policy could have severe consequences:
“Any suggestion of selectively suspending congressionally approved payments would erode trust and effectively constitute a form of default.”
Once lost, U.S. financial credibility may be difficult to restore.
While Musk faces legal challenges and continues to clash with government agencies, the probability of an official U.S. debt default remains low. However, political risk is surging, as demonstrated by Trump and Musk’s informal economic briefings inside the White House’s Oval Office—often featuring Musk’s son, X (named after his social media platform).
Given the chaos in Washington, global markets may accelerate efforts to develop alternative reserve currencies and payment systems to reduce dependence on the U.S. dollar.
The Trump administration’s isolationist approach was underscored last Friday when Treasury Secretary Bessent stated:
"The U.S. maintains a strong-dollar policy, but that does not mean other nations have the right to weaken their currencies."
In the short term, Trump’s fiscal policies could have the most immediate global economic impact through his long-standing tariff threats. While tariffs generally slow economic growth, Trump’s latest idea of a "reciprocal tariff" policy could further disrupt international trade—though its full effects may take weeks or months to materialize.
So far, financial markets have remained surprisingly calm despite Trump’s erratic trade policies and Musk’s aggressive government cost-cutting. Investors have largely bet on strong U.S. consumer activity and the resilience of the technology sector to sustain economic momentum.
However, every new crisis involving Trump or Musk in Washington increases the risk of a structural shift in global investor sentiment toward the U.S. economy—a shift that could have long-lasting global consequences.
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