Beautiful Virgin Islands

Thursday, Oct 30, 2025

Is a big debt crash on the horizon? - Part B

Is a big debt crash on the horizon? - Part B

The world is over 250 Trillion Dollars in debt: public plus private. Is that vast debt sustainable? Is this debt a bubble about to burst?
Now, there must be a limit to how much debt an economy can manage. There is an analogy: a family earning $100K per annum can simply not afford a $2 million mortgage.

Why: because all their income will be consumed by interest payments on their loan. Then the family becomes vulnerable to default and home repossession. Countries are different in that they are more resilient to debt. However, the analogy is valid as a warning against unsustainable debt.

OK. Investors in times of economic and political crisis view US Government Debt or Government Bonds and Treasury Notes as safe and valuable assets.

As long as these debt instruments are viewed as safe, investors will buy them.

Economically and financially powerful governments: the USA, UK, the European Union; are thus viewed as safe havens, and wealth protectors, by global investors. The preceding is the basis upon which government debt is raised at time of crisis and sustained. In fact, wealthy investors are the backers of the global economy in terms of the influences they have on global finance, politics, and economics.

And QE – massive borrowing from global investors by major central banks- has worked wonders in recent years, keeping the global economy from plunging off the precipice after the 2008 Financial Crisis, and today, keeping the world economy afloat during the COVID 19 pandemic.

But what does this massive debt overhang mean? For one, countries that were under debt strain before the pandemic such as Venezuela, Barbados, Nigeria, Zambia, and even Italy, may default on their debts.

Another problem for the world is that this huge debt may ultimately impact investor confidence in markets, and this, in turn, could lead to slow economic growth and a longer time for the world to come out of recession. Investor confidence is vital for economic growth as it further impacts consumer confidence, and demand and supply, in world markets.

Then there is the problem of countries spending a higher percentage of national income servicing debt. This lessens the cash governments have to invest directly into the economy and is a further drag on economic growth.

Developing countries stand to suffer most as industrialized states have the benefit of powerful central banks that can keep their interest rates low, and inject liquidity into markets, as these countries begin to exit recession and grow economically.

The opposite is the case for poor countries that have to follow the diktats of investor driven institutions such as the IMF and the World Bank.

These countries may well experience a prolonged recession. Foreign investors control the finances of developing countries by underwriting debt and balance of payments deficits, and by providing the platform for the stock, commodity, and currency trading.

Crashes occur when global investors panic because of unsustainable economic factors, such as huge debt levels, stock market bubbles, and runaway government spending.

For now, the federal reserve and the world’s major central banks appear to be providing the stimulus conditions that is keeping the global economy afloat.

However, the big question remains how governments and borrowers pay back the nearly two hundred and fifty trillion dollars in debt owed to investors?

So what does a debt crash mean? In simple terms, it is a repeat of the 2008 financial bubble recession, where the financial world collapsed like a pack of cards after the pinprick of banks deluged with unsustainable debt.

The problem with 2020 and beyond is that investors may not be too keen to lend central banks the trillions required to keep the world economy afloat, especially if there is no hope of that debt ever being repaid in a world economy that is anaemic and growing very slowly.

The world may be building an economy on a foundation of debt, which is akin to building a house foundation, on the sand.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×