Global debt reaches $315 trillion, crisis looms with no clear solution in sight.

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The world’s debt hit a jaw-dropping $315.1 trillion in early 2024, climbing $1.3 trillion in just three months. This unprecedented surge now equates to 333% of global GDP, a staggering figure that highlights the deep financial imbalances plaguing our economies. The U.S. and Japan led the borrowing frenzy in advanced economies, while China, India, and Mexico carried the torch for emerging markets. Since the pandemic, global debt has ballooned by $54.1 trillion, marking a 21% increase.

Non-financial companies now owe $94.1 trillion, governments $91.4 trillion, financial institutions $70.4 trillion, and households $59.1 trillion. In the U.S., debt servicing costs have surpassed defense spending, yet there’s no concrete plan to address the mounting debt. Some even jest that cryptocurrencies like DOGE might need to step up to save the day. Meanwhile, emerging markets are grappling with $105 trillion in debt amid a sluggish recovery from 2019.

On Friday, U.S. Treasury Secretary Janet Yellen announced that the U.S. will hit its debt limit on Tuesday, January 21st. Yellen has advised the U.S. Treasury to start “extraordinary measures” to manage this looming crisis. For some context, the U.S. debt crisis is not new. Since 2020, total U.S. debt has escalated from $23.2 trillion to $36.2 trillion—a $13 trillion increase in five years, or a 57% rise since the pandemic. In a particularly alarming development, the U.S. added $1 trillion in debt in just 105 days last year.

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The U.S. debt ceiling, the maximum amount of debt the government can incur, is set to be reached again. Once this limit is met, Congress must raise it to continue borrowing. This situation mirrors the debt ceiling crisis of June 2023, which nearly resulted in a U.S. default. The debt ceiling was suspended until January 2025, but as that deadline looms, the question arises: why can’t the U.S. simply stop borrowing?

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The answer lies in out-of-control deficit spending. In 2024, the U.S. deficit reached $1.8 trillion, or 6.4% of GDP, with over $1 trillion per year spent on interest expenses alone. With the debt ceiling set to be reached on January 21st, the U.S. has begun employing “extraordinary measures.” These maneuvers, such as suppressing the level of intragovernmental debt, create more space for public debt through various tactics. One significant method involves suspending daily reinvestment of certain funds, a strategy that allowed the government to borrow $262 billion in 2021, which was repaid later that year.

The global debt crisis continues to unfold, with staggering figures and complex economic maneuvers. It’s clear that both advanced and emerging economies are deeply entangled in this web of debt, and the path forward remains uncertain.

Sources:

https://www.visualcapitalist.com/global-debt-hits-a-new-high-of-315-trillion/

https://www.usatoday.com/story/news/politics/2025/01/17/us-debt-limit-what-happens-next/77784585007/

https://x.com/MarioNawfal/status/1879935316653461542


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