The United States and China are the world’s two great powers. The US boasts the largest economy, the global reserve currency, the leading AI firms, and a military with unmatched worldwide reach. China has the globe’s second-largest economy (far ahead of third-place Germany); commanding positions in key fields such as drones, batteries, and rare earths; an increasingly formidable navy; and, by virtue of its export dominance, substantial leverage over global trade. Cold War II is taking shape.

Or is it?

Dig deeper, and both nations start to look like surprisingly fragile societies drifting slowly but steadily toward disaster. Speaking on a podcast last month, China analyst Dan Wang offered a striking observation: “These two countries,” he said, need “to stop delivering” themselves “humiliating self-beatings.” In the United States, political divisions are entrenched, the distractions of the culture war persist, and respect for the rule of law is eroding. In China, meanwhile, disillusionment with the Chinese Communist Party—though largely hidden from Western eyes—runs deep, while the Chinese military reportedly wastes nearly half its time imbibing political propaganda rather than training for combat.

These pathologies suggest that the “Cold War II” frame—though it must be taken deadly seriously—will before long fizzle out. Each side has its own distinctive flaws, but the most important constraint is shared. Both are empires of debt.

America’s debt problem is well-known to anyone paying attention. Federal debt now stands at roughly $38 trillion. It grows at the staggering pace of more than $2 trillion a year—an especially grotesque accomplishment in a period of relative peace and prosperity—and the interest bill now rivals, and at times exceeds, what the country spends on the military. By any measure, the US debt trajectory is unprecedented and unsustainable.

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