Rich Nations’ Debt Could Blow Up With High-Interest Rates

Rich nations are in trillions of dollars of debt. And no one really seemed to care while interest rates were low. Now, interest rates are surging, and carrying trillions of dollars in debt means crazy interest payments that could eat up national budgets worldwide.

Is it normal for rich countries to have debt?

The debts of wealthy nations total multiple trillions of dollars. And up until relatively recently, it was of little consequence. The United States of America, Japan, the United Kingdom, and the European Union are all up to their eyeballs in debt. And nobody appeared to care all that much as long as interest rates remained low. After all, countries holding debt with each other has been commonplace for decades.

The current rise in interest rates, however, along with the fact that carrying debts amounting to trillions of dollars results in exorbitant payments, are eating away at national budgets all over the world.

How did we get here?

For some time now, politicians have been able to keep their campaign pledges while passing the buck to subsequent generations. And now, with interest rates being so high, there are concerns over countries being able to keep up with payments. Politicians typically point the finger of blame at the opposing party for the nation’s misfortunes.

Our current debt has been accumulating for some time. So, all sides have been highly irresponsible, and there is plenty of blame to go around. And that includes citizens, whether overspending or not holding our elected officials accountable through elections. After all, the rising household debt contributes to the national debt. In the end, it’s not a matter of who gets the blame but of how we can fix this.

What happens if national debt payments rise?

Now that inflation is rising, there is no doubt that government spending contributes to the problem. Every nation’s government is dependent on its ability to borrow money. And because we are now facing the end of cheap, infinite debt, we are going to be forced to make difficult financial decisions very soon.

So why would rich nations’ debt even exist? Traditionally, acquiring debt helps governments have tax reductions that sustain economic growth. The strategy works while low interest rates prevail and payments are manageable. However, as interest rates surge, so do national debt payments. Here’s hoping the Federal Reserve can right the ship before the country is forced to cut the national budget.

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