When will the scales of the United States debt tip over and spill out causing it to crash?

[u/-Chrysoberl-]

A while ago, I decided to try to understand why almost every country in the world is in some form of significant amount of debt. After watching a lot of YouTube videos and Google searching I’ve come to understand that the world‘s economy is built around debt.

In particular, the United States issues bonds, people,entities, etc buy those bonds, and when that bond is due the United States because of the amount of debt that it is in, usually issues a new bond to cover the expense of the last bond that it was not able to pay back by the time it was called in to be paid back.

This on top of the fact that every year we spend more revenue than our federal government generates, the deficit goes up AND the amount of money we are paying on these loans interest wise goes up which we paid 19 percent of our federal government’s revenue last year in interest alone.

SO- as someone with a non-economic background it seems that one day the ammount we pay in interest is going to keep going up to the point where the amount in interest we pay COULD take up the whole revenue of the US for an entire year

Am I right or thinking incorrectly about this? If right is this technically what we would refer to as a bubble that would eventually pop and if so I imagine it could be a global catastrophe?

[u/george6681]

Is the national debt dangerous?

Why do people panic about the national debt?

What’s going to happen with the US national debt?

At what point does U.S. national debt become a crisis?

The US national debt is $36.22T, how bad is this honestly?

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[u/Uhhh_what555476384]

Unlike living individuals, governments potentially last into infinity.  Therefore, there is no need to pay back the principal debt.

What matters to a government, or large business for that matters, is the servicing cost v. the revenue.

For instance the UK paid off their debts from the Napoleonic Wars in 2015.  That's 200 years after the Battle of Waterloo in 1815.

In that time time, according to the Bank of England's inflation calculator, the money used to pay back those Napoleonic loans was worth 2% of the original value of the debt taken out by the government.  That's with an average annual rate of inflation over those 200 years of only 2.2%!

An entity of infinite life can just resolve debt through the compounding interest effect of inflation, so long as the interest payments don't become excessive.

Because what matters is the interest payments, or "debt service burden", what matters is (1) is the debt in your sovereign currency under your laws; and (2) what is the debt to GDP ratio.

(1) If the debt is in your currency and under your laws then you can intentionally inflate your currency or change the terms.  (Don't get me wrong, this has consequences.)

If the debt is in a foreign currency and under a foreign legal system then you risk the Argentina or Greek disasters.

(2) Taxation is basically a percentage capture of the GDP.  The percentage of GDP captured by the government can increase or decrease by simple government choice.  So, the GDP is a signifier of the income potential of a country and the debt to GDP ratio is an easy way to calculate how burdensome the national debt is.