Sovereign debt

Another topic on debt! We often hear about how much debt each country has, so it's helpful to understand what sovereign debt actually is. While we'll focus on U.S. sovereign debt, the concepts apply to all countries.

• Sovereign debt

  • Debt issued by a country’s government.

  • Credit rating is determined by a country’s economic and political stability.

• US sovereign debt

  • The US has historically been the safest credit risk in the world.

  • Has never defaulted on its debt and is the world’s premier reserve currency.

  • Japan and China own the most US debt.

• Future of US debt

  • National debt was at $26T in 2023, which is almost the same size as the US economy.

  • Much political debate has taken place on how much debt is too much.

  • The US has built up a massive base of trust with investors globally, but there are risks if that trust goes away.

    • If the US defaults there will be devastating consequences.

  • Cutting spending and raising tax revenue are both options for reducing the debt burden.