Elon Musk declares ‘financial emergency’: What’s behind the $35 trillion ‘time bomb’ US is said to be facing

Tesla CEO Elon Musk has raised alarm over what he calls a "financial emergency" as U.S. government interest payments now exceed $1 trillion annually, surpassing the entire Defense Department budget.
Speaking at a recent Donald Trump campaign rally, Musk highlighted that interest payments now consume 23% of all federal tax revenue, as the national debt has ballooned to $35.7 trillion. Bank of America analysts project the debt could reach $36 trillion by year's end, with increases of approximately $1 trillion every 100 days.
The debt surge largely stems from COVID-era stimulus measures that contributed to inflation, forcing the Federal Reserve to implement historic interest rate hikes. Current projections suggest continued deficit increases, with analysts forecasting additional annual increases of $500-600 billion under various policy scenarios.
The mounting debt crisis has sparked a flight to alternative assets, pushing both Bitcoin and gold to near record levels. Bitcoin has approached its all-time high of $70,000, while investors increasingly view it as "digital gold" amid rising inflation concerns.
Investor Paul Tudor Jones, who previously dubbed Bitcoin the "fastest horse to beat inflation," has renewed his warning about a potential "debt bomb" resulting from what he terms "fiscal recklessness." The situation has created what analysts describe as a "nightmare scenario" for the Federal Reserve, which must balance controlling inflation against managing massive government obligations.
Tesla maintains significant exposure to cryptocurrency markets, holding approximately 10,000 Bitcoin worth $800 million on its balance sheet. The company recently transferred its Bitcoin holdings to new wallets, prompting speculation about potential sales.