The governments of the world are racking up debt at a monstrous pace, and the U.S. is at the front of the line.
A new report from Standard and Poor’s Global estimates that governments will add $8.1 trillion in new debt this year, with the total reaching a record $53 trillion by December 31.
More than two-thirds of the new borrowing will be used to refinance old debt, while $2.3 trillion will represent new debt.
With the U.S. on track to borrow an additional $1.4 trillion this year and expand our total debt to $24 trillion, we’re by far the biggest borrower in the world.
The U.S. and Japan combined account for almost 60% of all debt.
Analysts Karen Vartapetov and Roberto Sifon-Arevalo wrote in their report:
“By end-2020 we project that the commercial debt stock of all sovereigns we rate will rise by 5% to reach a record of $53 trillion compared to 2019 and by 30% compared to 2015.”
After the U.S. and Japan, China is forecast to issue around $636 billion, followed by Italy, Brazil, and France, each of which are expected to borrow $250 billion in 2020.
Those four together will account for around 17% of the global total, slightly below Japan by itself, while the G-7 group of nations will account for approximately 70% of global borrowing and debt.
The S&P report pointed out that:
“The (global) increase reflects the higher borrowing needs of the largest sovereign issuers as their fiscal stance loosens in 2020 amid the fragile global economic outlook.”
That’s economist-speak that means, “Countries of the world aren’t growing very fast, so their governments are going to borrow and spend to try and spark economic activity.”
We’ll see if it happens that way, or if it blows up in our faces. Eventually all this debt can’t be good.