The debt bomb

Global debt keeps going up. Both in absolute terms and relative to global GDP. It has reached $346Tn dollars as of Sept 2025 and represents approximately 338% of global GDP. Since the dollar is weakening against most currencies, when expressed in USD, debt has a currency component that has pushed the avokute level up, but that’s clearly not the root of thr problem. The relative part is the tricky one: the red line you see on the chart below measures debt over GDP, and that ratio has been trending down since 2021. Why? Because due to the massive money printing during Covid, inflation spiked, and that pushed nominal GDP (real growth + inflation) up, lowering the ratio. As the Fed and other countries controlled inflation, the repression effect stopped and now is reverting, and that’s why you see the red line trending up, timidly, but clearly. Central banks are lowering rates again, the Fed has stopped QT, and started something close to QE again (buying T-bills). That should be inflationary, and we might see the ratio trending down again, eventually. Despite what central banks and governments tell us, they need inflation, low enough to get them elected, but high enough to dwarf debt through repression. The debt bomb keeps ticking.

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