what the debt to gdp ratio can tell you
it often triggers financial panic in domestic and international markets alike when a country defaults on its debt the higher a country s debt to gdp ratio climbs the higher its risk of default generally becomes governments strive to lower their debt to gdp ratios but this can be difficult to achieve during periods of unrest such as wartime or economic recession governments tend to increase borrowing to stimulate growth and boost aggregate demand in such challenging climates this macroeconomic strategy is attributed to keynesian economics economists who adhere to modern monetary theory mmt argue that sovereign nations capable of printing their own money can t ever go bankrupt because they can simply produce more fiat currency to service debts this rule doesn t apply to countries that don t control their monetary policies however such as the european union eu nations that must rely on the european central bank ecb to issue euros 2world population review has reported that countries whose debt to gdp ratios exceed 77 for prolonged periods experience significant slowdowns in economic growth 3 every percentage point of debt above this level reduces annual real growth by 1 7 4the u s debt to gdp for q4 2023 was 121 62 almost double early 2008 levels but down from the all time high of 132 96 seen in q2 2020 5the u s has had a debt to gdp of more than 77 since q1 2009 the u s s highest debt to gdp ratio before that year was 106 in 1946 at the end of world war ii debt levels gradually fell from their post world war ii peak before plateauing between 31 and 40 in the 1970s ratios have steadily risen since 1980 they jumped sharply following 2007 s subprime housing crisis and the subsequent financial meltdown ratios then spiked during the covid 19 pandemic to reach new highs and have only slightly come down since then 51special considerationsthe u s government finances its debt by issuing u s treasuries which are widely considered to be the safest bonds on the market 6the countries and regions with the 10 largest holdings of u s treasuries as of april 2024 were 