The US national debt stands at more than $37,000,000,000,000. To put that in perspective, a trillion-dollar stack of $1 bills reaches 67,866 miles. That’s long enough wrap around the earth ~2.73 times. A stack of singles representing the entire debt stretches a little more than ten and a half times the average distance to the moon. If you’d prefer not to violate the laws of physics, a blanket of the US national debt made of dollar bills would cover 147,704 square miles (~382,552 square Km). That’s about the same size as Montana and just a little smaller than Bangladesh.
Early Sovereign Debt
While governments from ancient empires through the early Renaissance period ‘borrowed’ money, they differed from modern national debts. First, there was no commercial banking system to borrow from. When rulers needed to fund a war or project, they simply coerced the money from their subjects. Important citizens were compensated with the spoils of war or the benefits of the project. If that failed, the government could always debase the coinage by reducing the precious metal in it to ‘even’ things out.
Creation of National Debt
The development of commercial banks in the Italian city-states along with the rise of administrative government changed the game. Even in their early stages commercial banks offered access to far more capital than the monarch could reasonably extort from citizens. The additional funds enabled the use of debt to evolve. While they still funded wars and projects, they also supported a growing administrative state. The result was a permanent debt underpinned by taxes. This permanence contributed to the transition from personal debt of the monarchy to national debt. By the 18th century the British Parliament assumed responsibility for the country’s financial obligations from the monarchy.
Modern National Debt
The 19th century industrial revolution and the societal changes that followed altered the equation. In addition to funding wars, governments also borrowed money to fund public goods. These included education systems, canals, water systems, and other projects. The increased spending and technological advances spurred the acceleration of international capital flows. Nations created central banks and treaties to manage the rapidly expanding international banking system.
Systemic Challenges
Even with these precautions there were numerous crises in the system. The most catastrophic was the Great Depression in the 1930s which continues to affect our world nearly 100 years later. The collapse of the financial system contributed to the outbreak of World War 2 and the deaths of millions of people. At the end of the war, governments turned their focus to rebuilding. In addition to borrowing money for new infrastructure, they also reinvigorated depression era programs to create social safety nets. Initially designed to protect citizens from system crashes, the growth and costs of the safety nets have joined war and mismanagement as leading risks to the world financial system.
That leads us to our featured map courtesy of Worldpopulationreview which illustrates each country’s debt as a percentage of it’s Gross Domestic Product. Sudan, which is in the grip of a decades long civil war, recently surpassed Japan as the most indebted nation.
Bonus Information
If you’ve made it this far, you deserve a treat. Here are a few facts about the US National Debt.
~70% of US debt is held domestically.
The top three foreign holders are Japan ($1.13T), the UK ($779B), and China $765B.
With the exception of 1835-1836, the US has always had a national debt.
If you’re interested a live accounting of debt checkout the US Debt Clock:
As always thanks for reading.
Armen
Note to pay the bills
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