The issue of rising global government debt is becoming increasingly relevant.
As of early 2025, global government debt exceeded $95 trillion, with over $36 trillion attributed to the United States. The US debt-to-GDP ratio stands at approximately 123%. Due to the significant increase in public debt and budget deficits, international rating agencies have downgraded the US government`s top credit rating. Moody’s Ratings was the most recent, lowering the US government`s long-term credit rating in mid-May. Now, borrowing will become more challenging and expensive for the Americans.
Debt has been a constant companion to humanity throughout most of its known history. Records of debt were discovered even on ancient Sumerian clay tablets.
A state can reduce its debt if its revenues increase and expenditures are ideally curtailed. Significant economic growth or tax increases can contribute to this. Another option is large-scale issuance of new money, but this risks triggering inflation (a decline in purchasing power). In extreme circumstances, a state can refuse to service its debts and declare a default.
How did the US find itself in such a precarious situation? It`s insightful to consider quotes from three American researchers whose books were published around 2009–2011. Fareed Zakaria wrote in his 2009 book `The Post-American World`:
Since the early 1980s, Americans consumed more than they produced – and made up the difference by borrowing money. In 1990, the national debt was 3 trillion dollars. By the end of 2008, it had surpassed 10 trillion. Economic weakness will damage ideological wealth. The recognition that the financial innovations introduced over the past decade created nothing but a house of cards will undermine America`s authority. Selling American ideas to the rest of the world will now require more effort and will not always be fruitful. Developing countries will choose the economic policies that suit them best and will trust them. China has long offered a development model alternative to the American one.
Throughout human history, many countries have defaulted on their debts. The US could potentially follow this path. In 2011, Dambisa Moyo noted in her book:
A radical option is a US default. An outright US government default cannot simply be dismissed. It sounds like a catastrophe: stock markets would crash, the cost of debt would skyrocket, the dollar would instantly turn into colored paper, and naturally, there would be a deafening international outcry. In November 2009, the market was already pricing in the possibility that the US government would default on its obligations, which seemed increasingly likely. But how bad would a default really be for the US? Its advantage is that it would allow America to start with a clean slate, for the government to zero out its financial statements. Such a default could give the US an opportunity to undertake necessary internal policy restructuring, especially regarding debt, and also achieve increased investment in labor and technology.
Following the publication of these books, the US continued to accumulate debt. If it was $15 trillion in 2011, today it`s nearly $37 trillion. This naturally raises questions: who is lending the US money? Are they not concerned that the Americans will fail to repay?
David Graeber, an American anthropologist, offered this perspective in his 2011 book `Debt: The First 5000 Years`:
The US foreign debt takes the form of Treasury bonds held by institutional investors in countries which are, in most cases, American military protectorates (Germany, Japan, South Korea, Taiwan, Thailand, the Persian Gulf states). These are covered by US bases, bristling with weapons and equipment, which are precisely paid for by the budget deficit. So what is the status of the money that constantly flows into the US Treasury? Is it loans? Or tribute? In the past, military powers that had hundreds of military bases outside their own territory were commonly called `empires,` and empires regularly demanded tribute from subordinate peoples. The American government, of course, insists that the US is not an empire, but as is easy to see, the only reason it stubbornly calls these payments `loans` rather than `tribute` is that it denies the reality of what is happening. American imperial power is based on debt that will never—and cannot—be repaid. The US national debt has become a promise made not only to its own people but to the peoples of the whole world, although everyone knows it will not be fulfilled.
It is difficult to disagree with this viewpoint. It is becoming increasingly challenging for US partners to find funds to purchase American debt obligations, as they are themselves burdened by significant debts. The situation is particularly severe in Japan, where the national debt is close to 250% of GDP.
The growth of US debt has coincided with the large-scale printing of new dollars, leading to increased inflation. One consequence of this policy has been the rapid surge in the price of gold. In late April of the current year, quotes surpassed $3400 per ounce (though they later declined to $3300). In 2015, this figure was $1160. It`s well-known that the US severed the dollar`s link to gold in 1971 (ceasing to exchange $35 for 1 troy ounce of gold).
Gold is traditionally considered a reliable asset, having proven its worth over millennia. But what is the intrinsic value of gold? Historically, it was desired to signal social status. Wealthy individuals adorned themselves and filled temples with gold. Today, it is difficult to picture a wealthy person covered in excessive gold jewelry.
History teaches us that gold was not the sole measure of value. Items like furs or fabrics (such as silk) also served this function. Taxes were even paid with furs and silk. These commodities not only indicated their owners` high status but also offered practical utility. Furs provided warmth, and silk protected against lice. These values were sought after in various countries and held the status of `international means of payment`. The practical value of gold in bar form is questionable. Moreover, the rise in gold prices this year has already resulted in a decrease in sales of gold jewelry.
It is plausible that new measures of value will emerge. Energy could quite possibly become such a measure, as it is essential for both residential consumers and businesses. It is no secret that cryptocurrency mining requires vast amounts of energy, effectively converting electricity into digital currency. Is this a sensible use of energy, especially given the extreme instability of cryptocurrency value and its dependence on speculation?
Artificial intelligence also demands significant energy for its operation. AI has been developing at a rapid pace and will require ever-increasing energy inputs. A state capable of supplying its population and businesses with necessary energy at affordable prices, and even establishing successful energy exports, holds a distinct advantage. It is quite possible that energy security (in its various forms) could form the basis for currency stability. It`s conceivable that the US might explore this possibility. Energy costs are considerably lower there than in Europe, prompting many European companies to announce plans to relocate their industrial operations across the Atlantic.
Theoretically, the US could establish an entity akin to the Federal Reserve System (FRS) comprised of major energy companies and issue a new currency pegged to the average price of an energy unit on the American market, used concurrently with the dollar. This unit could be a kWh or a US therm. And if this new currency were humorously dubbed «EnergoTrump,» the US president would surely be delighted.
There are historical precedents for issuing parallel currencies. In 1922, Soviet Russia introduced the «gold-backed» chervonets, which was in reality rarely convertible to gold. In 1923, Germany issued the Rentenmark, supposedly «backed by real estate.» Those marks certainly could not be exchanged for actual land or property.
In Russia, the debt-to-GDP ratio is less than 20%, which is a very favorable indicator. The cost of energy in Russia is among the lowest globally. Furthermore, energy carriers constitute a very high proportion of the country`s exports. In the context of Western sanctions, Russia could propose to its partners the creation of a new currency for international settlements, directly tied to the price of energy.
