Why is every country in the world in debt?

Описание: 📍 📍 Why is every country in the world in debt? Let's understand. Nearly every major country, the USA, China, UK, Europe, India, are carrying massive debt loads. But what does all this borrowing really mean and why so much of borrowing? Let's try to understand. The United States is currently in debt to the tune of around $37 trillion.

A significant portion of the debt about 750 billion is borrowed from China. Meanwhile, China itself is dealing with a staggering $18 trillion in debt. This shows how interconnected the world financially is. As most countries owe money to one another. Globally, total debt, which is public and private combined, exceeded around 250 trillion in 2024, which is roughly three times the size of the global economy.

So how do countries end up with so much debt compared to their economies? The main reason is that countries borrow to fund growth and public spending, issuing bonds that investors buy, essentially lending money to the governments. Now, all this started around 50 years back. Before the 1970s, most countries were backed by gold.

The US decoupled the dollar from gold, enabling it to print more money without gold constraints. This gave way to a system where countries can essentially create more money to fund debts. Interestingly, about 70% of US debt is held domestically, mainly by American citizens via banks, that invest savings into the government bonds.

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So in a way, citizens are lending to their own government. Other major countries also borrow heavily. In fact, borrowing covers roughly 20% of their annual government spending on average. But this borrowing cycle can't continue indefinitely. Increased money circulation leads to inflation, which reduces purchasing power over time, creating challenges for the average citizen.

Wealth inequality is widening globally. While the rich invest in stocks and grow wealthier. Many others struggle with rising cost and stagnant wages. Currently, the US markets are performing exceptionally well attracting investors. However, to raise more funds through bonds, the US government may need to increase interest rates on bonds to attract buyers.

In conclusion, this unusual situation means that government leaders may prefer a cooling,Or correction in stock markets to help reduce borrowing costs and bring stability to the national debt. For individual investors, this highlights the importance of preparing for market volatility ahead. The best approach now is to diversify your portfolio, prioritize capital preservation, and avoid chasing excessive risk.

Staying informed about fiscal policy changes and economic indicators can help you make smarter decisions that protect your wealth during uncertain times.