The USA has debt of approximately $20 trillion worth of debt, 31.8% of global debt and 107% of its GDP. Such a high-level of debt is a cause for concern for multiple reasons.
The debt needs to be re-paid with interest meaning more and more of tax revenue from tax payers goes on paying off interest, rather than welfare service.
Governments get loans by selling bonds with a rate of repayment. If inflation goes above this rate, then it is easier for the government to repay the loan – BUT that means that savers lose out because the bonds they have bought are worth less AND everybody else loses out because rising inflation makes everything more expensive.
Therefore, such high debt levels could encourage inflationary behaviour from governments and central banks.
Additionally, although the rate of debt accumulation is seen as a high level of risk for investors, rather than the level of debt, high debt does leave countries vulnerable to fluctuations in the global economy as they may struggle to attract future investment when needed.
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