Good Morning! Welcome back to The Economic Wagon — today we’re tackling one of the biggest, most misunderstood forces shaping the global economy: debt. Not the “I forgot to pay my credit card” kind — we’re talking trillions shaping governments, markets, and everyday life.
Today’s Post
The Global Debt Puzzle: Why the World Is Borrowing More Than Ever
If it feels like everyone is in debt these days — you’re not imagining it. Governments, corporations, and ordinary households around the world are borrowing more than at any point in modern history.
As of 2025, global debt has reached a staggering $315 trillion, according to the Institute of International Finance — roughly 3.3x global GDP. That means for every dollar the world produces, it has more than three dollars of debt tied to it.
Some see this as a ticking time bomb. Others argue it’s simply how the modern economy works. The truth is more complicated — and far more interesting.
🏛️ Governments: Spending big and borrowing bigger
Public debt has exploded over the last 15 years. First the Global Financial Crisis, then the pandemic, then inflation, then geopolitical fragmentation — every shock required massive government spending.
Key forces driving government borrowing:
Aging populations → higher pension and healthcare costs
Green energy transitions → trillions in infrastructure
Defense buildup → largest surge in global military spending since the Cold War
Industrial policy → subsidies for chips, AI, and clean tech
Slow growth → tax revenues can’t keep up
The U.S. alone is running deficits around 6% of GDP, while its debt-to-GDP ratio has climbed past 120%. Japan is above 250%. Europe is trying to rein in spending but remains far above pre-pandemic levels.
Yet bond markets — so far — aren’t panicking. Investors continue buying government bonds because they’re still seen as the safest assets in a volatile world.
In other words, governments are borrowing a lot because markets allow them to.
🏢 Corporations: Debt as a business strategy
Corporate debt has also surged, especially in the U.S., Europe, China, and emerging markets. But unlike households or governments, companies often borrow by choice — not necessity.
Why? Because debt is a tool. A strategic one.
Companies borrow to:
Expand production
Buy competitors
Fund research and development
Lock in long-term financing at stable rates
Boost shareholder returns
In the 2010s, ultralow interest rates made borrowing so cheap that companies loaded up. Even now, despite higher rates, large firms continue to issue debt because markets are hungry for yield.
But not all sectors are equal.
Tech and pharma companies borrow to innovate.
Utilities and telecoms borrow to build infrastructure.
Property developers, especially in China, are drowning in debt — posing real risks to financial stability.
For healthy companies, debt can fuel growth. For overleveraged firms, it becomes an anchor.
🏠 Households: Squeezed but still spending
Household debt trends vary by country, but several themes are emerging globally:
1. Housing costs are the biggest driver
Mortgage balances have surged due to high prices and higher interest rates. In the U.S., the average monthly payment for a new mortgage is up nearly 40% since 2020. Similar jumps have occurred in Canada, Australia, and the U.K.
2. Consumer debt is rising
Credit card balances hit record highs in 2024–2025 as inflation pushed everyday costs higher. Buy-now-pay-later (BNPL) has also quietly ballooned into a massive shadow credit system.
3. Student and medical debt remain major burdens
In the U.S., education and healthcare debt are structural issues that shape entire generations’ financial lives.
Despite these challenges, consumer spending — somewhat surprisingly — remains strong, which is why many economists say households are stretched… but not yet broken.
📉 Is all this debt sustainable?
This is the trillion-dollar question — literally.
Debt doesn’t automatically signal crisis. It depends on:
Interest rates
Economic growth
Investor confidence
Debt composition
Government credibility
Economists often use one key rule of thumb: If an economy’s growth rate is higher than its interest rate, debt is generally manageable.
The problem today is that interest rates have been high, while growth has been moderate. That creates pressure — especially for governments and households.
But here’s what keeps the system afloat:
Central banks have stepped in when markets wobble.
Investors still trust major economies.
Most debt is held domestically, not by foreign creditors.
The world runs on credit — reducing debt too fast would crash growth.
Economist Kenneth Rogoff once said: “Debt is a feature of modern capitalism, not a bug.”
The challenge isn’t eliminating debt — it’s managing it intelligently.
🧭 What to watch in the years ahead
Interest rate cuts — If central banks ease policy, debt burdens will look much lighter.
China’s property crisis — Still a major global risk if it worsens.
Global defense spending — Rising tensions mean rising deficits.
Populist politics — Fiscal discipline becomes harder when voters want support.
AI-driven productivity — If AI boosts growth, debt sustainability improves dramatically.
The direction of global debt will depend heavily on these five forces.
⭐ The Bottom Line
Debt is everywhere — but not all debt is dangerous. Some fuels growth, some funds innovation, some supports social stability.
The real puzzle isn’t how much the world owes — it’s whether economies can grow fast enough to stay ahead of it.
For readers of The Economic Wagon, remember this:
Debt becomes a crisis only when confidence disappears. As long as markets trust governments, companies, and households to keep paying, the system holds.
The global economy today is highly leveraged — but still standing. The question for the next decade is how long that balance can last.
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That’s All For Today
I hope you enjoyed today’s issue of The Wealth Wagon. If you have any questions regarding today’s issue or future issues feel free to reply to this email and we will get back to you as soon as possible. Come back tomorrow for another great post. I hope to see you. 🤙
— Ryan Rincon, CEO and Founder at The Wealth Wagon Inc.
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