Mitch Salchow is President of Thor Metals Group.
The world is currently mired in record-setting debt. Last year, the combined borrowing of households, businesses and governments across the globe eclipsed $315 trillion. And in the first quarter of this year, global debt surged by another $7.5 trillion, reaching a new high of $324 trillion.
Heavy global debt loads can lead to widespread economic instability, currency devaluation, reduced private and public investment and an increased risk of a global fiscal crisis.
And one of the consequences of mounting debt levels in today’s environment are the skyrocketing debt servicing costs—or the amount of money required to not only repay borrowed loans but also the interest that has accrued on those loans.
The impact on business is particularly pronounced as rising global debt can undermine consumer spending, trigger higher borrowing fees, suppress available capital and result in corporate bankruptcies and/or insolvencies.
Global Debt-To-GDP Ratio
Nearly every country in the world holds debt, but some nations are more vulnerable than others in what is now considered to be a “High-Debt, Slow-Growth World.”
At over $36 trillion, the United States owes more money than any other country in the world, and America’s debt burden is increasing on average by about $1 trillion every three months. The U.S. is followed by China, with a national debt of around $18 trillion, and Japan, with around $9 trillion of sovereign debt.
While high debt figures are worrisome for any economy, a nation’s debt-to-GDP ratio is a more critical measure of financial health since it indicates a country’s ability to repay its liabilities relative to the size of its economy. The higher the ratio, the less likely it is that a country possesses the economic output to pay back its loans.
Based on data from the IMF World Economic Outlook, here are the countries with the highest debt-to-GDP correlation:
• Sudan: 252% of GDP
• Japan: 235% of GDP
• Singapore: 175% of GDP
• Greece: 142% of GDP
• Bahrain: 141% of GDP
• Maldives: 141% of GDP
• Italy: 137% of GDP.
• United States: 123% of GDP
• France: 116% of GDP
• Canada: 113% of GDP
Each of these nations has a debt tally that exceeds their total economic output or the overall value of all of the goods and services produced within their respective borders. At almost 123% of GDP, America’s debt liability not only threatens the solvency of essential programs like Social Security, Medicaid and Veteran’s benefits—it also elevates the risk of a financial crisis.
The Precarious Value Of Money
Global debt has been rising for well over a decade, but Covid-19 and the resulting lockdowns, business closures, government assistance and relief programs impacted global debt accrual. The fallout of black swan events like wars and pandemics can trigger higher interest rates, increase inflationary pressures, depress economic growth, erode investor confidence and depreciate the value of money.
History provides an infamous example of debt-driven currency devaluation in the case of the German Papiermark. In the 1920s, money was printed to pay off war debt and fund reparations, which led to crippling hyperinflation. The “mark” became so worthless that iconic photos of German citizens using banknotes as wallpaper serve as a sobering reminder of how quickly and completely debt can destroy the value of legal tender.
The Global Safety Net
Central banks have been acquiring gold at record levels. Gold has long been recognized as a time-tested store of value—and many of the world’s banks are on a buying spree in an effort to prop up their currencies, diversify their reserves and protect their economies.
Gold is an inflation hedge and widely regarded as crisis insurance. It is highly liquid and globally accepted, but most of all, it can be a safety net and a lifeline to governments plagued by the high debt levels. Indeed, gold is now the world’s second-largest reserve asset.
With debt now reaching unsustainable levels, the role of gold has changed. It is no longer just as a safe haven play or a crisis asset. It is now one of the preferred capital resources of some of the world’s leading monetary authorities. It has worldwide relevance and universal appeal, and its role as a medium of exchange and a global store of value is becoming more and more established. And as the value of paper money becomes increasingly unstable, I think this trend will likely continue.
Investing Considerations
Investment advisors, wealth managers and portfolio planners who position gold as an essential asset class could help their clients tap into its benefits as a strong diversifier, a stable long-term investment and a commodity with the potential for significant capital appreciation.
As with any investment, though, it’s important to note that acquiring gold does carry some downside. First, it is considered a non-yielding asset, meaning it doesn’t pay interest or dividends like CDs, bonds, stocks or Treasurys. Secondly, storing pure gold coins or bars is an added consideration and possibly an added expense. Gold needs to be kept in a secure environment safe from theft, corrosives, moisture and possible natural disasters, etc.
In addition, the price of gold can be volatile. It is heavily influenced by ever-changing demand triggers. For instance, gold has traditionally had an inverse relationship with Wall Street and the dollar. So, when the markets are high and the dollar is strong, gold prices tend to slump—and vice versa. Additionally, sometimes gold is negatively correlated to interest rates.
But in 2025, gold has defied many longstanding historical norms and traditional benchmarks. Record-setting world debt and steady and consistent central bank demand have made it one of the best-performing assets of the year, exceeding projections and surpassing price targets.
So, it’s important to think carefully about gold beyond short-term market fluctuations, interest rate chatter and even potential tariffs because long term, it could become a go-to asset.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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