MegaThreats

Massive levels of debt are a “megathreat.”

Even before the coronavirus pandemic, governments and consumers worldwide had run up huge amounts of debt. Then came the threat of a global depression, and governments borrowed even more. During the Trump administration, stimulus packages added $4.5 trillion in public obligations. Under President Biden, the debt kept growing. Public debt ballooned in Europe as well, and by the end of 2021, worldwide debt loads had exploded to 350% of global GDP.

In a healthy public debt cycle, governments can borrow during recessions to spur economic activity and then pull back public spending when times are good. That’s not what’s happening in the current environment of out-of-control borrowing. This leaves nations at risk of debt crises, to which governments often respond by devaluing currencies and slashing spending on social programs. And those sorts of harsh responses give rise to authoritarianism and, for particularly desperate regimes, secret sales of nuclear weapons to bad actors. Emerging markets face the direst outcomes from a debt crisis, but even the largest and most powerful economies won’t be immune.

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