During a Harvard economics class in late March, Fed Chair Jerome Powell fielded a question on what could spark the next financial crisis. He pointed to the United States’ soaring debt, now exceeding $39 trillion and 125 % of GDP, as the most alarming stressor. While analysts watch Iran‑related geopolitics and private‑credit strains, Powell warned that unchecked debt growth threatens the system’s stability.

U.S. borrowing has more than doubled since 2007, driven by persistent deficits, tax cuts and heightened spending, including a proposed 50 % defence budget hike to $1.5 trillion by 2027. Yale professor Andrew Metrick warned that if Treasury bonds lose their safe‑haven label, “the world says safe assets are no longer considered safe,” a scenario for which regulators have few tools.

Other risks—rising long‑term yields, a tightening European sovereign‑debt outlook and stress in the $1.8 trillion private‑credit market—compound the debt problem, but Powell dismissed immediate contagion from that sector. Instead, finance scholars such as LSE’s Jón Danielsson caution that recently rapid AI adoption in banks could accelerate shocks faster than regulators can respond, leaving the next crisis to unfold on a new technological front.