Washington says America can grow its way out of its debt. Central banks seem increasingly interested in something Washington cannot print.
“Truth, like gold, is to be obtained not by its growth, but by washing away from it all that is not gold.” — Leo Tolstoy
There is a lot of noise around the dollar right now.
The dollar is collapsing.
The dollar is finished.
BRICS is replacing it.
Gold is taking over.
All excellent material for social media.
Not necessarily excellent analysis.
So let’s do what Tolstoy suggested.
Wash away everything that isn’t gold.
Start with $40 trillion
America’s total public debt has now crossed $40 trillion.
Not projected to. Not someday.
It crossed the line in August and stood at about $40.1 trillion by September 3. Treasury data showed that roughly $32.4 trillion was held by the public, with the remainder held in government accounts.
Twenty years ago, total federal debt was around $8 trillion.
Now it begins with a four.
That deserves more than a shrug.
Treasury Secretary Scott Bessent’s response is essentially that America can grow its way out of the problem.
“There’s nothing magic about the $40 trillion number,” Bessent said after the threshold was crossed, adding that the country could grow its way out of it.
In theory, that makes sense.
If the economy grows faster than the debt burden, debt becomes easier to carry relative to national income.
There is just one small problem.
The debt has to stop outrunning the growth.
And that is where the arithmetic becomes considerably less comfortable.
The chart tells the story rather efficiently.
Roughly $5.7 trillion in 2000.
$14 trillion by 2010.
Almost $28 trillion by 2020.
And now more than $40 trillion.
The issue is not simply the size of the pile.
It is the price of carrying it.
When interest rates were close to zero, governments could accumulate enormous debts without immediately feeling the full cost.
That world has changed.
Higher yields mean refinancing old debt and issuing new debt becomes increasingly expensive. And with large deficits continuing, Washington needs buyers for an enormous quantity of Treasury securities.
Which brings us to gold.
While Washington talks about growth, central banks are buying insurance
Central banks around the world continue to accumulate gold.
Not because they have collectively decided to bury the dollar tomorrow morning.
Not because monetary Armageddon is scheduled for Tuesday.
And not because everyone needs to start digging a bunker.
But the buying is real.
Central banks purchased a net 863 tonnes of gold in 2025. That was actually down from the extraordinary 1,000-tonne-plus buying seen during the preceding three years, which is an important bit of context.
Then 2026 became interesting.
After a weak revised first quarter, central-bank net purchases jumped to about 289 tonnes in Q2, a record for a second quarter. The World Gold Council says reserve diversification and geopolitical uncertainty remain important drivers of demand.
So why gold?
Because gold is peculiar.
It has no central bank.
It has no finance minister.
It has no election.
It doesn’t promise to pay you back in ten years.
And perhaps most importantly:
Gold is nobody else’s liability.
That matters in a world drowning in IOUs.
Has gold really replaced Treasuries?
You may have seen another dramatic claim recently:
Gold has overtaken U.S. Treasuries as the world’s preferred reserve asset.
There is some truth buried inside that headline.
But this is exactly where we need to wash away the noise.
A Federal Reserve analysis published last week noted that the market value of global official gold reserves did indeed surpass foreign official holdings of Treasuries in 2025.
But that does not mean central banks suddenly dumped their Treasuries and bought mountains of bullion.
Much of the increase came from something much simpler:
Gold got considerably more expensive.
If you already own an asset and its price explodes higher, its weight in your portfolio increases even if you don’t buy another ounce.
The Fed also notes that a substantial portion of global gold reserves sits with countries that have held large quantities for decades rather than recently accumulating them.
So no.
Central bankers are not collectively throwing their Treasury bonds into Boston Harbor.
But neither should we ignore what is happening.
Because they are continuing to buy gold.
And perhaps “insurance” is a better word than “replacement.”
America’s extraordinary privilege
For decades, the United States has enjoyed something most countries can only dream about.
The world wants dollars.
The world wants Treasuries.
International trade is heavily conducted in dollars.
Central banks hold dollars as reserves.
And when Washington needs to borrow another trillion dollars, there has historically been an enormous global pool of buyers prepared to lend it the money.
That remains an extraordinary advantage.
And it remains intact.
But confidence should never be confused with permanence.
If debt keeps climbing while deficits remain large and borrowing costs stay elevated, investors eventually begin asking an awkward question:
How much will the money I am being repaid with actually be worth?
And that is where gold becomes interesting.
Not because the dollar is necessarily dying.
Not because civilization is ending.
But because gold represents something governments cannot manufacture with a keyboard.
Scarcity.
Gold isn’t screaming. It may be whispering.
Central-bank gold buying should not be treated as proof of an approaching dollar collapse.
That is too easy.
And frankly, too sensational.
But dismissing it completely would be equally foolish.
Markets often whisper long before they scream.
Perhaps gold is whispering something fairly simple:
The world still trusts the dollar.
It just may not trust it quite as blindly as it once did.
Washington believes America can grow its way out of $40 trillion of debt.
Maybe it can.
A productivity boom could change the arithmetic. Stronger real economic growth would generate more income and tax revenue and make the existing debt burden easier to carry.
But if growth fails to keep pace with borrowing, the available choices become considerably less pleasant.
Taxes can rise.
Spending can fall.
Inflation can erode the real value of debt.
Governments can encourage domestic institutions to absorb more sovereign debt — the broad family of policies often described as financial repression.
Or policymakers can employ some combination of the above.
None comes without a cost.
Which brings us back to Tolstoy.
Wash away the dollar-collapse merchants.
Wash away the reassuring political soundbites.
Wash away the gold bugs predicting monetary Armageddon.
Wash away the people telling us $40 trillion is nothing to worry about.
What remains?
A mountain of debt.
Higher borrowing costs.
And central banks continuing to accumulate an asset nobody can print.
That doesn’t tell us the dollar is finished.
But it might be telling us something about trust.
And trust, unlike money, cannot simply be printed.
The Impartial Lens provides market commentary and education only. Nothing published here constitutes investment advice.