Obviously if everybody is in a deep debt hole, it makes the problem that much worse when the debt bubble pops. From Schiffgold at schiffgold.com:
The US national debt is so out of control that, ironically enough, even the Federal Reserve chair has expressed concern about the problem. And while America is among the top contributors, it isn’t just the US that’s spending money it doesn’t have: after briefly declining in 2023, the global debt-to-GDP ratio is again at an all-time high.
Even though interest rates are still extremely low by any free market standard, with even modestly elevated interest rates in the US, payments on servicing the debt skyrocket. This blows up the national debt balloon even bigger. With zero chance of Washington reigning in spending anywhere near enough to keep up, the interest can only be paid with even more borrowing.
The largest quarterly increases were unsurprisingly in the US and Japan, and these are a couple of the most indebted national economies overall. But emerging markets are now along for the ride, with some of the largest debt-to-GDP ratio increases this year coming from the likes of China, India, Brazil, and Mexico. Along with Thailand and Korea, China’s ratio of consumer debt to GDP is still above pre-COVID levels.
