alt Hacker NewsU.S. debt-to-GDP ratio reaches 123%
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It always gives me an ominous feeling to see these headlines. It's like we're walking out further and further on a frozen lake. "Hey, it's OK, the ice hasn't cracked yet! Let's keep going!"
Debt-to-GDP ratio is useful for comparing the debt loads of two countries, but not terribly useful in assessing the serviceability of debt for a single country.
That is, suppose two countries both have $100B in debt. One of them is a small island nation; the other is a global superpower. Obviously the global superpower will be better able to handle that - dividing by GDP helps make that clear.
However, this simple division doesn't tell you some important things. How much of the debt comes due very soon? It's worse if the answer is "most of it." How was it incurred? "Winning a war" is much better than "losing a war."
The United States has lots of debt, and personally I'm worried about the long term serviceability of it. But the ratio to GDP isn't why!
Not an American, but I would argue that this level while little bit of a concern is not a huge issue for a superpower that borrows in its own currency and has the military and economic might to crush any party (sovereign or corporate) attempting move away from that system.
You guys are too powerful.
Why is this a meaningful figure? It's not debt that matters its how much it costs to finance it. It's Finance 101 that if you manage to borrow below inflation rate, and you have the luck that what you paid for appreciates, then your debt will disappear over time.
On the contrary, trivial amounts of money with usury can ruin you financially.
The US Dollar is chronically over-valued because of its reserve currency status. The US wanted it that way, opposing Keynes proposal of an international clearing union using a clearing currency (which he called the Bancor) that is independent of any specific country. This automatically means that US companies suffer a huge competitive disadvantage which results in an external deficit. The foreign sector accumulates dollar savings. Now the US household sector naturally also runs a surplus. This only leaves the companies and the government which must by logic of sectoral balances run a deficit for the economy not to shrink. The companies are in aggregate also running a surplus since the neoliberal shift and that leaves only one sector that must have a matching deficit if you want to at least keep up economic activity. If the government sector wants to run a surplus that automatically and necessarily must mean that one of the other sectors must run a deficit by logic of accounting. Which one should that be and how do you want to force it to run a deficit? The foreign sector is not an option as long as the US Dollar is the dominant reserve currency because it is overvalued. The households are a natural saver almost always running a surplus. That leaves only the companies to run a deficit. Now how do you get the companies to run a deficit (in aggregate of course, we are not talking about a single company)? You need to make them invest more than they earn. This used to be the role the company sector had until the 70s. Since then we got Thatcher and Reagan with financialization, deregulation, pressure on wages (they fell from about 70% of GDP to about 60%). The government will have to run massive deficits just to keep the economy going unless we roll that back.
Slaps the hood of a cybertruck
This bad boy can hold a LOT of debt.
The stock and real estate market, huge sources of wealth for the us population, are still near all-time highs and many people, tens of millions at least, have way more real money than they’ve ever had in their lives, and yet a massive number of those people would rather not take a hit to their wealth when it’s easiest to absorb the hit and instead prefer cutting things that even they like the government providing (medicare this week the latest example in an endless number of examples these past months). It really is crazy how wealth-obsessed many Americans are.
And I say that as an absolute hater of how the pols run the place (yes both sides. One for having no sense of how to manage money and the other having some sense but ignoring it; one of these is objectively worse than the other (yep, I said it, objectively!)).
Seems like the end goal is not to have a country left but instead a bunch of factions more likely to be at war fighting over cash, resources and culture issues. Depressing as fuck for those of us not excited about that end goal.
Let the market decide
Applies only if you are the reserve currency, label everyone else who don't use your currency the way you want it as currency manipulators and you can take whatever debt you want because well the printer can pay everything back in the future.
The wisdom was that the US dollar due to its exorbitant privilege (https://en.wikipedia.org/wiki/Exorbitant_privilege#Origin) can afford these debts.
Countries put up with it because the US "provided protection" and insured maritime freedom of navigation. Oh wait ...
Japan is at well over 200%, and has a very real population crisis. Italy is 138%, France is at 117%, Canada is at 110%. UK and China are around 100%.
123% comparatively speaking isn't great, but it's not shockingly terrible.
Everyone hates regulations until they realize every regulation actually does something. Everyone hates spending until they realize the money goes towards something.
None of this will get solved until a crisis
This Is Probably Fine! by Patrick Boyle - https://www.youtube.com/watch?v=5nvsDmwZWdM - May 29th, 2026
> US 30-year Treasury yields just hit 5.2% — the highest level since July 2007. UK gilt yields are at levels not seen since 1998. Japanese bond yields are at record highs. Something is happening in global bond markets, and it's not just about inflation. In this video I explain what's driving the global rise in long-term borrowing costs, why the era of free money is probably over, and what fiscal dominance means for central bank independence. I cover the history of US presidents fighting with the Federal Reserve — including LBJ shoving his Fed Chair against a wall — the 1970s UK economic collapse, the Liz Truss mini-budget crisis, the role of private credit and off-balance-sheet SPVs in financing the AI boom, and what all of this means for the new Federal Reserve Chair Kevin Warsh.
The entire world is super leveraged at levels generally seen during major recessions or wars.
And that's excluding the huge amount of multi tiered private credit.
While this is not an indication of anything bad on its own it definitely creates the conditions for cataclysms.
It's like being on a very very dry hay field, it does not mean that you're bound to die on fire, it just means that the risks of a fire being extremely destructive are high.
On the bright side it isn't growing and is down from the pandemic-era 132% of GDP. (Although maybe that was because GDP shrank rather than any change in fundamental debt.)
This still isn’t too bad compared to other countries, also, most of the AI industry profits are still yet to be fully realized.
I wonder what the exit plan is. One time conversion of social security into Trump accounts and call it a day?
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Upsetting how we are reaching these lows while the administration is accusing everyone else of wasting taxpayer money except for themselves. At least under previous administrations you would get something for your money, like science funding and healthcare for the needy, not just bombing runs and posturing.