Governments Enter Unchartered Territory With Record-Level Debt, Spending Frenzies Despite Fear Of Inflation

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Melanie Wilcox Contributor
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Global government debt has reached its highest levels since World War II, exceeding the world’s yearly economic output.

To erase the damage of COVID-19, governments are borrowing more, according to The Wall Street Journal. Spending could cause robust growth and reverse many wealthy countries’ unease. Otherwise, inflation, high taxes, or possibly default are the only ways to absorb the world’s debt, according to the outlet. (RELATED: $24 Trillion Leap In Global Debt Driven By COVID-19, Experts Say)

For the second year in a row, the U.S. government could reach a $3 trillion budget deficit, according to the WSJ. Because of the Federal Reserve’s hesitancy about increasing interest rates, 10-year Treasury bonds yield around 1.33%.

“The world has changed,” Paul Sheard, a research fellow at the Harvard Kennedy School and former chief economist at credit-rating company S&P Global, told The Wall Street Journal. “The intellectual frameworks have evolved. We don’t need to worry.”

In 2020, the world’s government debt increased to 105% of global GDP from 88% before the pandemic, according to the Institute of International Finance (IIF), The Wall Street Journal reported. The IIF says in 2021, total worldwide government debt could increase an extra $10 trillion to reach $92 trillion, with most of the increase occurring in developed economies.