#43 Debt and Growth—Can $325 Trillion Fuel a Better Future?

As per Reuters, the total global debt in the end of 2024 stood at $325 trillion.

There have been umpteen times the U.S. Congress has debated the debt ceiling and with Trump in the office the chatter is feared to drive volatility in gold and bitcoin.

There are three major type of creditors for this debt:

a. Domestic Creditors such as the central banks, domestic pension funds, corporations and individuals that buy government bonds

b. Foreign creditors that include organisations like the IMF, World Bank and other nations - Japan and China hold a lot of U.S. Treasury bills

c. Multilateral institutions like Asian Development Bank, European Investment Bank

Countries operate at certain designed Debt to GDP ratios which according to them is healthy - USA at 121%, France at 111%, India at 82%, China at 88%

There are 3 key feature of this mammoth global debt which I found interesting -

Aspect 1: Whose Burden Is it?

By design it is us, the citizen and the upcoming generations who inherit the responsibility of repaying debt through higher taxes or spending cuts

Aspect 2: Why is this debt necessary?

Investments in infrastructure, education and innovation can help boost future growth and incomes. If you don’t invest you will surely not get the benefits,

Aspect 3: What is the role of inflation?

Debt can be reduced by inflation but this harms the savers and fixed income earners which shifts the burden from one side to the other

Follow Pranjal Shukla and read more such insights at www.shuklapranjal.in

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