If Every Country Is in Debt… Who's the Money Owed To?

America is $36 trillion in debt. That's

a number so big it's nearly impossible to comprehend, but it's still money owed to someone. People often point to China

to someone. People often point to China as the biggest lender. And sure enough, they hold about $750 billion worth of it. But here's the thing. China is also

it. But here's the thing. China is also drowning in debt of its own. In fact,

over $18 trillion worth and counting.

So, who's holding their debt? A lot of it sits with Chinese banks. But those

same banks also own debt from the United States. And American banks, they're

States. And American banks, they're holding debt from China and Europe and just about everyone else. If that sounds confusing, it's because it is. The

deeper you go, the more entangled it all becomes. Every country is borrowing.

becomes. Every country is borrowing.

Every country is lending. And somehow

the world is now $300 trillion in debt.

Triple the size of the actual global economy. But if the world is in this

economy. But if the world is in this much debt, then who is it all owed to?

It's a really simple question, but one with a surprisingly complicated answer.

It's not just a weird accounting trick, but a clue that something much deeper is happening under the surface. The answer

reveals how the modern world isn't built on stability. It's built on motion, on a

on stability. It's built on motion, on a neverending cycle of borrowing, lending, and reinvesting. This is the story of

and reinvesting. This is the story of how global debt became the engine of the modern world. And what would happen if

modern world. And what would happen if people really stopped lending?

Debt might sound like a modern problem, just a big scary number on a government spreadsheet. But in reality, it's one of

spreadsheet. But in reality, it's one of the oldest ideas in human history. Long

before banks, before coins, or paper money, debt was simply a promise.

Imagine lending your neighbor a bag of grain in the spring. When harvest came, they'd pay you back, maybe with a little extra as a thank you. No interest rates, no complicated contracts, just trust.

Because for thousands of years, humans understood a simple concept. Sometimes

you need something right away, but can only pay for it later. That's all debt really is at its core. Borrowing from

tomorrow to solve a problem today. Over

time, simple personal loans evolved into something much bigger. Kings wanted

castles. Empires needed ships and cannons, but no single lender could foot the bill. In the 1600s, England faced

the bill. In the 1600s, England faced this exact same problem. King Charles II was preparing for war with the Dutch, but the treasury was empty and the nobles refused to lend. So they tried

something new. They sold pieces of debt

something new. They sold pieces of debt to the public. In return for cash, citizens got a written promise of repayment with interest, a bond. It was

simple, but it changed everything.

States could now raise huge sums of money without raising taxes or draining their treasuries. And by the 20th

their treasuries. And by the 20th century, bonds went global. World War I and two pushed countries to borrow at an unprecedented scale, not just to fight,

but to rebuild. Then in 1944, the Bretonwoods agreement made the US dollar the centerpiece of the global financial system. Currencies were tied to the

system. Currencies were tied to the dollar. The dollar was tied to gold, but

dollar. The dollar was tied to gold, but gold was limited and economies had to grow. As the US ramped up spending,

grow. As the US ramped up spending, there wasn't enough gold to back the flood of dollars in circulation. So in

1971, President Nixon broke the link, ending the gold standard. From that

point on, money became what we now call fiat currency. Not backed by gold or

fiat currency. Not backed by gold or anything physical, just by government decree. Governments could now create at

decree. Governments could now create at will. And if that sounds like a recipe

will. And if that sounds like a recipe for endless borrowing, it was. From the

1980s onwards, global debt exploded.

Countries discovered that borrowing wasn't just useful in wartime, it could fuel the economy's growth, too. And so

borrow they did. to build schools, repair roads, and even to carry the economy out of recession. Debt became

the engine of progress for first and third world countries alike. And over

time, it stopped being a last resort and became the norm. Today, debt is how things get built, how crisises get managed, and how promises get kept. And

the result, a global debt mountain that now tops $300 trillion, more than three times the value of everything the world makes in a year. To put that into

perspective, a stack of $1 million bills would be 100 m tall and about the height of a 30story building. $1 billion would reach 100 km, high enough to touch the

Earth's atmosphere. But $300 trillion is

Earth's atmosphere. But $300 trillion is enough to go to the moon and back 50 times. That's the amount of debt that

times. That's the amount of debt that we're talking about. So, if every country is borrowing, who are they borrowing from? And if everyone owes

borrowing from? And if everyone owes money, who's getting paid? When we talk about the national debt, it's easy to picture some big powerful shadowy figure pulling the strings and holding all the

money. But that's not how it works.

money. But that's not how it works.

Because modern debt doesn't just move in straight lines like we're used to. It

moves in circles. To better understand this concept, let's zoom in on the United States, the world's most indebted country. You may be wondering who can

country. You may be wondering who can possibly lend them that much money. But

here's the surprising part. Roughly 70%

of the debt is actually owed to Americans themselves. So, the US borrows

Americans themselves. So, the US borrows from itself. Here's how it works. We

from itself. Here's how it works. We

know that governments borrow money by issuing bonds and promising to pay it back with interest, the exact same way that you would borrow money from a bank.

So, who is buying these government bonds? Well, most likely you. When you

bonds? Well, most likely you. When you

put money into the bank, it doesn't just sit there in a vault. Banks put the money to work trying to grow it so they can pass some interest back to you, which they do by lending, investing, and

of course, buying bonds. As of now, commercial banks in the US hold nearly $1.8 trillion worth of US Treasury bonds, triple the entire GDP of

countries like Brazil or Canada. Bonds

are an incredibly popular investment because they're one of the safest ways to earn interest on spare cash. Unlike

the stock market, they don't bounce up and down every day. Of course, the interest rate can still be changed by the government to help manage the economy. And in the 1980s, yields jumped

economy. And in the 1980s, yields jumped to over 15% as the government tried to bring down high inflation. And during

the COVID recovery in 2020, they dropped below 1% to encourage more spending. But

whenever you buy a bond, the rate is fixed until you get paid back fully. So

whatever the government does afterwards isn't your problem. A 10-year US government bond today will pay you a steady 4.5% interest per year, which is pretty good considering the near zero

risk. And that's a big part of why bonds

risk. And that's a big part of why bonds and debt are so popular. So of course, it's not just banks who buy up bonds.

It's anyone sitting on a large pool of money. Pension funds, insurance

money. Pension funds, insurance companies, investment firms, they all do the same thing. Buy bonds and earn interest. In 2024, US pension funds

interest. In 2024, US pension funds invested a quarter of all their money into bonds. And for insurance company,

into bonds. And for insurance company, this number was even higher. over 60% of their assets were placed in bonds, using them as a reliable way to grow their funds while keeping risk low. This

creates a kind of hidden network where people's savings become loan money for the government. So although it may sound

the government. So although it may sound weird that the US is borrowing from itself, it's actually just money flowing from parts of the country where it's sitting idle to parts where it's needed and being spent. When the government

pays interest on its debt, that money flows right back into the hands of the lenders, giving them even more spare cash. And what do they do with it? They

cash. And what do they do with it? They

buy more bonds and earn more interest.

This becomes a sort of self-reinforcing loop where money constantly cycles through the same system by moving from lender to borrower, then back to lender, and then back to borrower over and over.

And the same loop exists between countries, too. About 30% of US debt is

countries, too. About 30% of US debt is held overseas because just like American banks or pension funds, foreign governments and banks also put their spare cash into US bonds. And following

the same logic, money flows in when we borrow, back out when we return, and repeats. Now remember, it's not just the

repeats. Now remember, it's not just the US doing this. Every country is borrowing and every country is lending.

The Japanese savings become loans for the Dutch. The Dutch savings become

the Dutch. The Dutch savings become loans for the Brazilians. and the

Brazilian savings, they end up flowing back into American bonds. The world's

debt isn't just a pile of unpaid bills waiting to explode. It's more like an interconnected web of circular systems where money flows in loops from savers to borrowers and back again. Governments

borrow, investors lend, and the interest payments keep the cycle going. And while

some of that money crosses borders, most of it never really leaves the system. It

just changes form, hands, and keeps moving. So, if the government keeps

moving. So, if the government keeps borrowing and spending it all, how do they pay back their debt in the future?

Well, here's the thing. They simply just borrow more debt to pay back their old debt. And although that might sound

debt. And although that might sound reckless, which it kind of is, it's actually the foundation of how the global economy now works. So, why does this system just keep going? Why doesn't

the world just stop borrowing? Because

now we're in a point where everything from our economy to our politics is built around debt. The uncomfortable

truth is that debt fuels growth. When

the government borrows and spends, money circulates into the economy. Businesses

earn more, workers get paid, and so they spend more. It becomes a feedback loop

spend more. It becomes a feedback loop that keeps the economy expanding so everyone can be better off. In China,

19% of all government spending comes from debt, meaning one in every 5 yan their spend is actually borrowed. And

this figure is even higher in the US, around $1 in4. That's the same amount of money it spends on both education and welfare combined. If the government

welfare combined. If the government suddenly stops borrowing, it would have to spend less and money stops flowing into the economy. Businesses earn less, workers lose their jobs, and so they stop spending. That very same loop that

stop spending. That very same loop that grows the economy is turned upside down, leaving everyone worse off. Take Greece

for example. When the 2008 financial crisis hit, investors panicked and suddenly stopped buying Greek bonds because they seemed so risky. Greece was

left unable to borrow and quickly ran out of money to spend. One in four public workers were fired. Wages fell by 30% and over the next few years their

GDP shrank by a whopping 25%.

Politicians know this and so do the people. Everyone wants the government to

people. Everyone wants the government to keep on spending so the economy can keep on growing. And so no one wins elections

on growing. And so no one wins elections promising austerity. Spending continues

promising austerity. Spending continues and borrowing becomes inevitable. But

it's not just about growth. Sometimes

it's about survival. When an economic crisis hits, like COVID in 2020, people stop spending and the economy shuts down. The only way out of this is for

down. The only way out of this is for the government to step in and cover that spending people are unwilling to do. In

a crisis when people aren't paying their taxes, they have to borrow. In 2020, the US government borrowed an astonishing $3.8 trillion in a single year, nearly

20% of their entire economy. and so did China, Europe, and every other economy out there. It wasn't a choice, but a

out there. It wasn't a choice, but a necessity. Now, remember, when you

necessity. Now, remember, when you borrow money, it must be returned in the future. And if a government is already

future. And if a government is already spending everything it collects just to keep the economy going, where does the money to repay old debt come from? The

answer is simple. To pay back what they borrowed, they borrow again. And this

debt just never leaves the system. In

wealthier countries like Germany and Switzerland, this isn't seen as a major problem. their bonds are considered

problem. their bonds are considered safe, so they can keep on borrowing at low interest rates, making debt easier to cycle through. But for developing nations, it's a different story. Higher

borrowing costs make each roll over more expensive. And over time, the debt

expensive. And over time, the debt starts to feed on itself. Countries like

Sri Lanka and Pakistan have found themselves in a debt trap where they are forced to just keep borrowing to meet the interest payments on past loans. So

when people ask in America, why can't we just stop borrowing? The truth is is that we can't. The same debt that weighs us down are actually the very pillars that the entire economy was built upon.

And this raises an uncomfortable question. Can it really go on like this

question. Can it really go on like this forever? Because no matter how smooth

forever? Because no matter how smooth the cycle seems, there are risks building beneath the surface. Risks that

the government avoids talking about and that no one really wants to face. As the

government continues to borrow, the debt grows and so do the interest payments.

Over time, a bigger and bigger slice of the budget goes back towards paying old loans, not funding new schools, hospitals, or infrastructure. Having a

debt to GDP ratio near 100% is now seen as the normal. When a few decades back, it would have been catastrophic. This

isn't really a problem when borrowing is cheap and lenders are confident. But

that all changes with risk. If investors

stop wanting to lend, the cost of borrowing suddenly shoots up. One way

governments try to handle this is by printing more money. This might sound like an easy fix, but it comes with a big downside. When more money enters the

big downside. When more money enters the system, it reduces the value of each individual unit, and the result is inflation. Prices rise, savings shrink,

inflation. Prices rise, savings shrink, and people start to feel poorer. In

extreme cases, it can spiral out of control. In Venezuela, in the late

control. In Venezuela, in the late 2010s, the government printed so much money to cover its debts that the price of goods doubled every few weeks. A loaf

of bread that used to cost 10 bolivars suddenly cost millions. The currency

became almost worthless and ordinary people saw their life savings vanish overnight. While most countries don't

overnight. While most countries don't face such extreme cases, even moderate inflation can cause big problems by making their currency less valuable. The

risks are even bigger for many developing countries as they often borrow in foreign currencies like US dollars as a security. Which means if their own currency weakens, paying back debt suddenly becomes more expensive in

local terms. And as that burden grows, lenders may start to doubt a country's ability to repay. And it doesn't take long for the mood to shift. Suddenly,

investors demand higher interest rates to compensate for the risk. And when

governments can't borrow enough, how do they pay back their old debt? Do they

cut spending, hike taxes, print more money? None of these options are easy,

money? None of these options are easy, and they all come with severe consequences. And even if they do go

consequences. And even if they do go through it, there's no guarantee that they will even make enough money eventually. If a country can't find the

eventually. If a country can't find the money and the bills come due at once, the country runs out of options. That's

when they default. A default is when a country simply says, "We can't pay."

It's the sovereign equivalent of missing your mortgage. Except it's not just your

your mortgage. Except it's not just your house at risk, but the entire economy.

And worst of all, the government can't just borrow its way out because nobody wants to lend to a defaulter. But when a system becomes fragile and dependent on debt, people start looking for something

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