Everyone’s in debt, America, China, India, Europe. But if every country owes trillions, who’s actually lending? The answer reveals a financial loop that’s pushing the global economy toward a tipping point, warns investment banker Sarthak Ahuja.
In a LinkedIn post that’s stirring debate, Ahuja breaks down a rarely addressed paradox: the world is drowning in over $300 trillion of debt, yet the global economy is only worth around $100 trillion. “Practically every major country is indebted to every other,” he writes, “but the debts don’t cancel out. Instead, they keep growing.”
The U.S. alone owes $36 trillion—with $750 billion of that held by China. But China itself is $18 trillion in debt. The loop keeps going.
Why? “Because countries need money to grow,” Ahuja explains. They borrow by issuing bonds, and those bonds are bought by citizens, banks, and foreign governments. In fact, 70% of U.S. debt is owed to its own people. How? Banks use public deposits to buy government bonds—turning everyday savings into government loans.
This cycle exploded after the U.S. ditched the gold standard in the 1970s. With no cap on money printing, governments could print more to spend more—feeding inflation and ballooning debt.
But there’s a catch. As markets boom, investors demand higher returns. To sell bonds, the U.S. now has to raise interest rates, which risks crashing markets. If that doesn’t work, the next options are higher taxes or default.
Emerging economies like Sri Lanka and Pakistan are already deep in the spiral—offering high bond rates just to stay afloat, which only worsens their debt burden.
The result is rising inequality: “The rich keep investing in stocks and getting richer,” Ahuja notes, while inflation eats into everyone else’s income.
As trust in fiat currencies erodes, traditional stores of value like gold and silver may surge again—serving as financial lifeboats in a system that’s running out of answers.
