The World Debt Bomb.
What does it mean?
Debt is a funny concept. Most people see this number on paper and liken it to their car loan or their house mortgage. Its just a number of money I owe, right?
The numbers are a little staggering, but the debt. Its just a number, right?
Well no. And this is what most people do not think about when using debt. Debt is the use of resources now, on the premise I will pay you back at some later date. Thats right, its fundamentally an IOU. However, the important part is that you get the resources now without paying for them.
It means the world (as a whole) has already used the resources they have promised to pay for. That promise is actually in resources too - labor, materials, ip etc. Which means when you look at debt you are looking at resources youve already allocated that you and your children will have to pay for.
The bomb.
As this wealth debt cycle continues, as can be imagined, the larger the debt gets and the more future resources you need to pay that debt. If, in the case of the boomers (the most populus demographic on the planet), you have debts but because of your volume of people they controlled the flow of money, and now future populations (all going to be smaller) are going to have to pay for the debt the boomers created.
A great book that covers this is called “The Pinch” and it goes deeply into the political influence and the economic power this segment of society controlled over the last 70+ yrs.
The following generations of the boomers, to be able to achieve they same wealth and lifestyle, have to borrow more purely due to ongoing long term inflation (growth? - will talk later about this) and then generations after have to borrow even more.
The end net result of this, is the world has over 110 Trillion USD in debt (estimated of course - its likely much more than this by potentially more than 3x).
The big kicker here is that China underreports all of its debt so that it keeps getting investors buying into China. This has lead to massive hidden debts run by LGFVs (Local Government Financing Vehicles) - these are basically massive loans coming by interim banks from the goverment and private sector. They are essentially what we in the west call “Loan Sharks”, but this isnt the main problem. The main issue is the scale of the hidden debts - it is essentially doubles Chinas debt profolio.
The Nation - Chinas Local Government Debt hits a new record
Even this report can only estimate how big it is. And most economists put it around the 10-20 trillion USD mark. There are LGFVs that are running infrastructure like the high speed rails that are losing billions USD every month.
Behind Asia - Japans Profit vs Chinas Trillion-Dollar Debt
There is also the problem of opaqeness in Chinas stock market (being gov manipulated) and its internal financials now banned from being independently audited - even in the US!
Reuters - China audits littered with definicencies
But this isnt just in China. This is across the board. The hidden debt size is expected to be far larger and we see above.
The world bank generated a study back in 2024 where they estimated the hidden debt to be as much as 30% more than current world debt estimates due to problems like the above:
World Bank - Hidden Debt Revelations
And this is a conservative finding in my opinion. There are other reports, that explain up to 5x more debt - criminal, black market and coercive groups controlling countries finances.
Investing.com - Government spending lifts global debt to a record $348 trillion
This is the bomb. The scale of resources we have spent in the last 50 yrs has been unsustainable. Because the people left to pay the debt will be shrinking, not growing (thats right, the world population growth is slowing).
The Conversation - Global population growth is now slowing rapidly
CFR Education - Global Population Growth is Slowing Down
The result of this slowdown, is that the labor component of repaying these massive debts currently owed, is shrinking, not growing. Which means that debt - cant be paid. Thats right. This is the bomb. The debt we have now wont be paid.
The explosion
If we cant pay the debt, cant we just keep borrowing? Well, you see, thats the thing. The entire debt system only works if the people lending the debt beleive they will eventually get paid. If at any time they start to believe that wont be the case, then humanity stops.
Everything is debt driven. And I mean everything. If trust is broken in the chain or the economists behind the banks and lenders realise they wont make their money back, it will be all over. Once one bank figures this out, they all will, since the others wont want to be left holding all the debt.
Remember what happened in 2008, where the bad mortgage bonds were this exact same type of thing. The failed trust in those bonds (because they were trash value) was discovered, and everyone rapidly tried to dump them. And caused a global financial crash.
Federal Reserve History - The Great Recession and its Aftermath
Think about that. This was one type of market bond, in one country (the US) that caused world wide economic ripples and destruction. Now, consider the 110 trillion dollar debt balloon you see above, and the problems servicing that - it wont happen. It really wont. And when it pops, thats is. Economies everywhere are done.
And thanks to inflation, the scale of this grows at a logarithmic rate, not a linear one (ie compounds not adds). As an example a debt of $1000 USD in 1945 would be the equivalent of over $18,000 debt now - thats 18x in 70 yrs.
If we consider a soft 3% inflation over the coming decades (very unlikely) then that 18,000 balloons like so:
- 2030 - $20,300
- 2040 - $27,300
- 2050 - $36,700
Looks reasonable, but remember we used $1000 of resources in 1945, and now owe 36x more by 2050. This assumes no payments made, but it is to explain how money is made from that loan by the financial groups. When scaled to nations, this means the banks, lenders and financial institutions are making a large amount of money for nothing. Thus there are resources lost in this process. Unproductive losses. They always claim its the financial institutions that provide the trust, and thats what you are paying for - sadly, this only exacerbates the destruction to future generations of people.
People are not ready for this to happen, but its coming. And money will fundamentally become worthless. Dont think gold is gonna help you too. Whos gonna buy it? You might have a mountain of it, but if no-one has debt driven capital to buy it, its worthless.
What the…
Yes. This is an end-game for economics. Even MIT predicted this back in the seventies. You cant keep borrowing, because its not “just a number in a bank” its actually resources you bought without having created the resources yourself to buy them (ie saved and worked). You have pushed that off to the future… and the future is coming to collect.
The Guardian - Yep, its bleak, says expert who tested 1970s end-of-the-world prediction
Enviroment Institute - MIT Predicted in 1972 that society will collapse this century