The Insurmountable Debt Problem
Governments around the world are in debt, and in debt big time. That’s a problem for average folks like you and I.
Here’s part of the problem: our government can’t balance the budget and is effectively operating on larger and larger lines of credit. Which means the US government is taking out loans to pay for its bills, and is having to make payments on those loans.
To put it in perspective, if the US government brought in $4.92 trillion in revenue in 2024. Except, it budgeted for $6.75 trillion. That’s like a family who makes $492k a year but knowingly plans to spend $675k that year.
What’s worse is that of that $6.75T, $1.126T was spent on interest on outstanding debt. That’s over 22% of the total revenue (other wise known as taxes you pay) spent on interest.
Thats like spending a quarter of your paycheck on credit card interest, and your balance doesn’t even decrease because that’s just the interest payment. The government still has to pay back the money it’s been borrowing.
For perspective, $1T = $1,000,000,000,000.
At the end of Fiscal Year 2024, the US debt was sitting at $35.5T, or 7.2 times the annual revenue. If we spent the entire $4.92T worth of the government’s “income” on paying back these loans, it would take over 7 years - and that’s not counting interest payments. It’s also not counting regular expenses the government is already committed to - like Social Security, public school funding, Snap / EBT, infrastructure and security.
The other potential problem is this: Gita Goliath, a Harvard professor, wrote an article in October 18th’s publication of The Economist warning readers about the peril of an American stock market crash. She compared our current economic temperature to that of the 90’s right before the dot com bubble crashed. Except this time, the sheer value of Global Governmental debt prevents our government from enacting policies or pushing stimulus packages to help citizens recover from such a crash.
Gita hypothesized that an American stock market crash would burn $35T of global wealth. That means our global trading partners would suffer financially too, curtailing our ability to rely on income from increasing exports. There’s no one to export to if no one is buying.
From a more localized perspective, a stock market crash could destroy the value of retirement accounts in the short- and medium-term.
The situation could turn ugly. If the stock market crashes and leads to an economic downturn, the GDP suffers. The government, being over-leveraged and unsustainably over-spent has few levers to pull to help stimulate the economy to help the people recover.
Now, theoretically this can all be avoided and this worst case scenario won’t happen. No one wants the stock market to crash. No one wants an economic downturn. Even so, not wanting one isn’t enough to prevent it.
One of the, rather unfortunate, paths we might find ourselves on is the path of inflation. The Economist in the aforementioned journal also hosted an article that suggested inflation could be the salvation these over-spent governments pursue. By devaluing the dollar, their previous debts become worth less and the nominal GDP rises, even if the actual value of said GDP does not, and now these debts are relatively less expensive. Problematically - that devalues the dollar. Everything gets more expensive.
Is this a reason to panic? To sleep with cash under the mattress and never invest? No.
Instead, people should be setting themselves up for success - or at least hedges themselves against the potential risks. Keep investing to hedge against inflation, but keep some cash in hand to hedge against emergencies, and consider investing in stable assets outside of the stock market (like your home).
Perhaps the most important step for people is to learn from the government’s mistakes and not live outside of one’s income. If you’re spending more than you’re making, something has to change. Maybe you decrease your spending. Maybe you increase your income. Even better, do both if you can.
Living on loans is a dangerous place to be, and while we shouldn’t live in fear, there must be recognition of potential outcome.
On a personal level: Pay off your debt, because heaven forbid the economy turns down and jobs are lost - those debts don’t just go away. Those payments have to be made. Ignoring those debts destroys your credit - and hurts your ability to take out future credit for things like a home or a car, and poor credit can also limit your options for renting.
The government should take that advice, too. Eventually our debts must be paid, either on our terms or via painful reckoning.
It’s time to pay off debt, both personal and governmental, and it’s time to build a more secure financial position.
This article referenced the following:
“The Coming Debt Emergency,” and “By Invitation: Gita Gopinath on the crash that could torch US$35 trillion of wealth” The Economist, October 18, 2025, https://www.economist.com/weeklyedition/2025-10-18.