Saw in the news, "U.S. hits $38 trillion in debt, after the fastest accumulation of $1 trillion outside of the pandemic." Probably all countries are "in debt" too, right?

That is a significant figure for the U.S. debt. And you are right to suspect that this is a global trend.

The vast majority of countries around the world do carry a national or government debt. In modern economics, having some level of debt is considered normal and is often a result of governments borrowing money to fund public services, infrastructure projects, or manage financial shortfalls.

🌎 Key Points on Global Debt Most Countries Have Debt: It is extremely rare for a country to be completely debt-free. Data from institutions like the IMF and World Bank show that almost every recognized country has a recorded national debt.

A Tool for Growth: Governments often use debt as a tool to invest in the economy (like building roads or schools) or to stimulate growth, which can lead to higher future tax revenues to pay the debt back.

Measuring the Burden: The raw dollar amount of debt, like the U.S. $38 trillion figure, can be misleading on its own. Economists prefer to look at the Debt-to-GDP ratio (Debt as a percentage of Gross Domestic Product) because it measures the debt burden relative to a country's total economic output and its ability to pay it off.

📊 Countries with the Highest and Lowest Debt While the US debt figure is the largest in raw dollar value, other countries have a much higher debt burden when measured relative to their economy (Debt-to-GDP ratio).

Category (Based on Debt-to-GDP Ratio) Example Countries Ratio Range (Approx.) Note

Highest Debt Japan, Sudan, Greece, Singapore, Italy Over 130% - 230% Japan consistently has the highest debt-to-GDP ratio globally.

Lowest Debt Brunei, Kuwait, Afghanistan, Estonia Under 15% These often have small, natural resource-rich economies or very conservative fiscal policies.

Major Economies United States, China, France, Canada Ranges from 60% - 125% The U.S. ratio is currently around 125% of its GDP.

Even countries listed as having the "lowest" debt, such as Brunei and Kuwait, still have a positive debt-to-GDP ratio (e.g., in the range of $2-12%$). The idea of a completely debt-free country is mostly a theoretical concept in the current global financial system.Would you be interested in seeing the Debt-to-GDP ratio for any other specific countries?

so all countries are "in debt"?

That's an excellent question that gets to the heart of modern global finance.

The answer is Yes, almost all countries are "in debt," and having a government debt is generally considered a normal part of running a modern economy.

🎯 The Distinction: Low Debt vs. No Debt While many countries have extremely low debt (especially when measured as a percentage of their economic output), it is exceptionally rare for an independent nation to have absolutely zero national debt.

Why?

Fiscal Tools: Governments issue debt (like bonds) to raise money for various reasons—funding public services, building infrastructure, managing shortfalls, or funding wars/crises. Having this option provides vital economic flexibility.

Financial Systems: Government bonds are the foundation of many global financial systems. They are considered the safest asset and are used by banks, pension funds, and other institutions for regulatory requirements, safe investment, and managing risk. An economy with no government bonds can actually face challenges because it lacks this critical safe asset.

Low Debt Examples: Countries often cited as having the "lowest" debt (like Brunei, Kuwait, Hong Kong SAR, and Liechtenstein) still have a low, positive Debt-to-GDP ratio, not a true zero. They achieve this low ratio through large revenues (often from natural resources like oil/gas) or extremely conservative fiscal policies.

For example, Brunei's Debt-to-GDP ratio has been reported as low as $2.5%$, and Kuwait's around $3.04%$. While nearly debt-free, they technically still have outstanding obligations, meaning they are not truly at zero.In essence, having no debt is possible, but having some debt is the universal norm because it's a necessary tool for managing a complex national economy in the global financial system.

Would you like to know more about the difference between national debt and external debt?

How about the US.. extrapolate this behavior towards debt, into the future.. are you able to see a point and a date for when the system will crap out and I guess it'll be like zimbabwe where they'd use wheelbarrows of cash to buy a loaf of bread. That's where this type of behavior eventually heads towards if you don't ever pay off the debt and it keeps increasing?

That's a very understandable concern, and one that is at the center of the debate among economists and policymakers.

The short answer is that most projections show the US debt is on an "unsustainable path" over the long term, but there is no consensus on an exact date for a catastrophic "crap out," and the US is highly unlikely to experience the kind of hyperinflationary crisis (like Zimbabwe) due to its unique position in the global economy.

📅 The Unsustainable Path: Future Projections Major non-partisan groups like the Congressional Budget Office (CBO) and the Government Accountability Office (GAO) explicitly state that the current fiscal trajectory is unsustainable.

Debt-to-GDP Ratio: This is the most critical measure. The U.S. debt-to-GDP ratio (debt held by the public) has already surpassed 100%. The CBO projects that, if current laws and spending trends continue, this ratio will rise to around 156% by 2055.

Historical Peak: The debt-to-GDP ratio is projected to exceed the historical peak (set just after World War II) around 2029 and continue climbing.

The Tipping Point (The 2050s): Some economic models, like those from the Penn Wharton Budget Model, suggest there is about 20 years for the government to make significant course corrections. They estimate that if no changes are made, the debt dynamics could become truly unsustainable by the 2050s, where "no amount of future tax increases or spending cuts could avoid the government defaulting on its debt."

The primary drivers of this long-term increase are rising net interest costs on the debt, and increasing spending on Social Security and major health care programs (like Medicare) as the population ages.

🚫 Why the U.S. is Not Likely to Become Zimbabwe While the financial path is risky, a hyperinflationary collapse like Zimbabwe or Weimar Germany is considered a very low probability for the U.S. due to fundamental differences in its financial system:

1. The U.S. Dollar's Unique Status The U.S. dollar is the world's primary reserve currency. This means:

Global Demand: Countries, central banks, and major corporations around the world need and hold U.S. dollars and Treasury bonds for trade, stability, and security. This creates a massive, constant, global demand for U.S. debt, keeping interest rates lower than they would be otherwise.

Trade Dominance: Most global commodities (especially oil) are priced in U.S. dollars, which reinforces its stability and value.

Zimbabwe, in contrast, was a relatively small economy with a national currency that lacked international credibility or demand.

2. The Nature of the Crisis Crises for a major reserve currency nation are more likely to manifest as a slow, painful process called fiscal dominance rather than a sudden hyperinflationary collapse.

Crisis Type Zimbabwe (Hyperinflation) U.S. (Debt Sustainability Risk)

Main Mechanism Government finances deficits by literally printing large amounts of new money (monetizing the debt), rapidly destroying the currency's value. Rising debt crowds out private investment, leads to slower economic growth, and forces the government to spend an ever-increasing amount on interest payments.

Outcome Cash loses value daily; people use wheelbarrows of cash for a loaf of bread. Slower economic growth, lower standards of living, rising interest rates for everyone, and limited government resources for defense, education, or infrastructure.

3. The Real Danger: Crowding Out and Financial Crisis The danger is less about hyperinflation and more about fiscal drag and financial crises:

Interest Payments: As debt grows and interest rates rise, the government's annual interest payments start to crowd out other critical spending. Interest is already a massive and growing part of the federal budget.

Slower Growth: High debt forces the government to compete with private businesses for borrowed funds, which can drive up interest rates for everyone (home mortgages, business loans), leading to slower long-term economic growth.

Loss of Confidence: The true "crap out" moment would be when domestic and international investors suddenly lose confidence in the U.S. government's ability to service its debt, leading to a sudden, sharp spike in interest rates, which would precipitate a financial crisis.

In conclusion, while a definitive "date" for a collapse is impossible to predict, the US debt trajectory is a significant long-term structural issue. The path leads toward slower growth and increased financial risk, which is a severe problem, but not the same as the hyperinflation seen in the most extreme historical examples.

Would you like to explore the policy options Congress has to address this debt trajectory, such as spending cuts or tax increases?

who are they paying this debt to?

That is a great question. When people talk about the U.S. government "owing $38 trillion," it can feel abstract, but the debt is actually held by a diverse set of real entities, both inside and outside the country.

The national debt is money owed to anyone who has purchased U.S. Treasury securities (like Treasury bonds, bills, and notes). Think of these as IOUs that the government issues to raise cash.

The owners of this debt fall into two main categories:

1. Intragovernmental Holdings (About 20%) This is the debt the government owes to itself. It represents money one part of the government (a trust fund) has temporarily lent to the Treasury for safekeeping.

Social Security Trust Funds: This is the largest single holder of government debt. The Social Security system has historically taken in more money than it paid out and is legally required to invest that surplus in special-issue Treasury securities.

Federal Employee Retirement Funds: Funds set aside for the retirement benefits of federal and military employees.

Medicare Trust Funds: Funds dedicated to the Medicare program.

2. Debt Held by the Public (About 80%) This is the money owed to outside investors—individuals, corporations, and governments. This is the portion of the debt that is traded on financial markets and is the focus of most financial and political debate.

A. Domestic Investors (The Largest Share) The majority of the publicly held debt is owned by people and institutions inside the United States.

The Federal Reserve: The U.S. central bank holds a large percentage of the debt. It buys and sells Treasury securities as a tool to manage interest rates and the money supply (a process often called quantitative easing or tightening).

Individual Americans, Banks, and Corporations: This includes you, me, and major U.S. financial entities.

Mutual Funds & Pension Funds: Your 401(k), retirement funds, and investment portfolios hold trillions in U.S. debt because Treasuries are considered a very safe investment.

Insurance Companies & Commercial Banks: They hold Treasuries for liquidity and safety.

State and Local Governments: They often invest their surplus funds into U.S. Treasury securities.

B. Foreign Investors (About 25-30% of Public Debt) Foreign entities, including central banks and private investors, hold a significant portion of the debt, mainly because U.S. Treasury bonds are viewed as the safest and most liquid investment in the world.

Top Foreign Holders (Governments and Institutions) Amount (Approximate)

1. Japan Over $1.1 Trillion

2. The United Kingdom Over $800 Billion

3. China Over $700 Billion

4. Cayman Islands Over $400 Billion

5. Canada Over $350 Billion

(Note: The Cayman Islands holds a large amount because many international investment funds and financial institutions are legally headquartered there.)

In Summary

Most of the U.S. national debt is owed to Americans—through their retirement funds, the Federal Reserve, and government trust funds. The second largest group is foreign governments and investors, primarily in Asia and Europe, who buy U.S. debt as the ultimate safe haven for their savings and international trade reserves.

Does this breakdown of who holds the debt change how you view the issue?

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