The Debt Tsunami: Washington Keeps Borrowing. Who Pays?

Total global debt—government, household, corporate, and financial—has reached a record of more that $353 trillion, according to the Institute of International Finance (IIF). 

That is roughly three times the size of the world economy – around 305–308 percent of global GDP.

Most of this debt, especially government debt, cannot be paid off.  It must be rolled over, that is as one debt instrument matures today, it can only be paid off by simultaneously selling another bond to replace it.  Of course in today’s environment, the maturing debt will typically carry a lower interest rate, while the bond that replaces it will bear a higher interest rate.  

That means that the debt will continue to grow because of higher rates, even before we ever take into account persistent fiscal deficits.

To be frank, this is a conundrum that any responsible economist or Treasury official could have – and  should have – seen coming.  America’s leadership has instead buried its head in the sand.  Treasury secretary Scott Bessent has tried to downplay concerns with an age-old dodge: “We’ll grow our way out of it.”  

But there are no (or very few) responsible economists of influence in Washington.  In a way the situation our country is in can be seen in the 1989 film Parenthood with Steve Martin.  Martin plays a responsible son, while his father, played by Jason Robards, continually enables Martin’s wastrel, gambling brother.  

Robards keeps indulging this son, covering his gambling debts and paying for the get-rich-quick schemes he chases.

It’s not only a common theme in fiction, it is a common theme in real life.  The American electorate is like Jason Robard’s character.  They may suspect that Republicans and Democrats alike – who  assure them some get-rich-quick scheme (like A.I.) will enable Washington to get its debt under control – should not be trusted.  But they keep electing such people over and over.

So it is that our compounding national debt will not end well.  If our country must learn a bitter financial lesson, one that has been experienced by governments over and over throughout the centuries and around the world, there is not much that any of us can do, except to avoid being personally victimized by it.  Watch the movie if you like.  They part we have described will probably leave you with a sinking feeling.

Then speak with us about getting out of the way of the coming monetary reckoning with gold and silver.  In a world facing a tsunami of unpayable debt, t’s the responsible thing to do.