How to stop worrying about the $40 trillion yes trillion with a T thats now owed by the US government
Yes, the nation’s debt surpassed $40 trillion in August – yes, trillion, with a “T” – but beware the panicky prophets of “doom loops” and “death spirals”.The anxiety is understandable, of course.It’s not particularly nice to contemplate yearly interest payments that topped $1 trillion with a ‘T’ last year – surpassing, for example, a US defense budget which fell just short of that staggering $1T mark.Nevertheless, let’s try and put emotions aside for a moment – a rare thing in this traditionally charged discussion.
Likewise, let’s consider a few facts which are as seldom cited as they are true when it comes to our national debt.Fact: Measured correctly, debt is down over the last decade.You read that right – down, not up!It’s worth noting that debt-o-phobes are prone to fixate on whatever category of debt happens to be in the news on a given day – credit card debt, Treasurys, mortgages, car payments, you name it.
A number is particularly ripe for outrage when it’s big and round – e.g.$40 trillion.But even mind-bogglingly big, round and seemingly unprecedented numbers are misleading without appropriate context.
In this case, it’s only logical to step back and look at the global picture over time.Fact: Total global debt of all types combined has fallen when compared to the global economy’s size – and by a lot.Worldwide government, corporate and household liabilities total 246% of global GDP – down from 2020’s 285% peak.
We match 2016’s total, and we’re near that of 15 years ago.How did that happen? Partly, central banks’ COVID-era monetary madness created massive inflation.Bad! But it also made existing debt cheaper to repay, as I detailed in 2024.
Hence, since 2020, global public debt-to-GDP fell from 111.5% to 95.6%. Fact: Globally, corporate debt-to-GDP slid from 106.6% to 93.3%.Global household debt sunk from 69.8% to 59.8%.
Shockingly, we could add another $42 trillion in debt globally before reachi...