Market commentator The Kobeissi Letter highlighted on Tuesday the severity of the ongoing debt crisis as advanced economies, including the U.S., wrestle with record or near-record debt-to-GDP ratios.
Developed Economies Grapple With Surging Debt
In an X post, The Kobeissi Letter shared IMF data showing gross government debt-to-GDP ratios of the G7 countries.
Japan’s ratio remained the highest at 204.4%, followed by Italy at 138.4% and the U.S. at 125.8%. U.S. levels are slightly below the 132% record set during the COVID pandemic in 2020.
The average ratio across advanced economies was 108.20%, with Germany being the only one with a ratio under 100%.
“The global debt crisis has never been worse,” the Kobeissi Letter remarked. “The world economy is drowning in debt.”
US Default Imminent?
The total U.S. national debt has hit $40.39 trillion, while the federal budget deficit for fiscal year 2026 has already hit $1.99 trillion.
Economist Peter Schiff told Benzinga that the U.S. debt problem is “particularly problematic” and could worsen if interest rates continue to rise.
He warned that the federal government could be “forced into default,” either on its debt or on commitments to private citizens, such as government pensions and social-assistance programs, including Medicare.
Billionaire investor Ray Dalio said last week that the U.S. faces a “death spiral” due to an oversupply of government debt, which will eventually lead to economic weakness and negatively impact equity markets.
Despite this, bettors on Polygon (CRYPTO: POL)-based Polymarket see only a 2% chance that the federal government fails to make any payment on its debt instruments in 2026.
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