3 Things 2-23-26

 Thing One

All Debt Must Be Repaid

Ten years ago, a good friend wrote about an article he'd read about debt. Below is a rewrite with updated stats. It's defintiely worth a read...

The article "Managing Debt in an Overleveraged World" by Michael Spence warned that global debt had surged by roughly $60 trillion since the financial crisis — a 75% jump relative to global GDP. At the time, that number felt staggering. The world had failed to deleverage after 2008 and instead chose to borrow even more in the name of recovery.

Fast forward to today, and that warning looks almost conservative.

Global debt has now climbed beyond $300 trillion. Debt-to-GDP ratios across major economies remain historically elevated. U.S. federal debt has risen to levels once associated only with wartime. China’s debt buildup fundamentally reshaped its financial system. Corporations borrowed heavily during years of artificially suppressed interest rates. Households stretched to afford inflated asset prices.

We didn’t solve the debt problem highlighted a decade ago — we multiplied it.

And now we face it in a very different environment: higher interest rates, persistent structural deficits, slower growth, and far less room for policy error.

Not All Debt Is Equal — But All Debt Must Be Repaid

The earlier article made an important distinction that still holds: the composition of debt matters.

Excessive household debt tied to inflated asset prices — especially real estate — is particularly dangerous. When asset values fall, consumption drops quickly. Growth slows. Employment weakens. Recovery drags on.

Government debt carries a different risk. It rarely collapses overnight, but it quietly erodes flexibility. When interest rates rise, servicing costs rise with them. Today, a growing share of government budgets is devoted not to new investment, but to paying interest on past borrowing.

Corporate leverage adds another layer. For years, cheap money encouraged borrowing not necessarily for productivity gains, but for financial engineering. When refinancing costs reset higher, the pressure builds.

Debt does not disappear. It either grows into productive capacity — or it becomes a burden.

Growth Is the Only Sustainable Solution

Debt sustainability ultimately comes down to nominal growth — real growth plus inflation.

For over a decade, policymakers relied on near-zero interest rates and aggressive monetary easing. Growth remained modest. Then inflation surged to multi-decade highs, forcing central banks to tighten aggressively. Now we have:

• Higher interest rates

• Slower real growth

• Elevated debt levels

• Rising debt service costs

Debt that felt manageable at 2% interest looks very different at 5% or 6%.

When growth fails to outpace debt accumulation, arithmetic takes control. And arithmetic has no political bias.

The Illusion of Permanently Cheap Money

The post-crisis world created the illusion that borrowing costs would remain near zero indefinitely. Governments, corporations, and individuals made long-term decisions based on short-term monetary policy.

That era is over.

Today’s higher-rate environment exposes structural weaknesses that were masked for years. Interest expense is rising rapidly. Refinancing is more difficult. Fiscal flexibility is shrinking.

Temporary emergency policies were treated as permanent conditions.

That miscalculation carries consequences.

The Real Divide: Consumption vs. Investment

The most important point from a decade ago remains unchanged: borrowing to fund consumption is unsustainable. Borrowing to fund productive investment can be transformative.

Debt used to expand productive capacity — infrastructure, technology, energy, education, innovation — can generate returns that exceed its cost.

Debt used to maintain current spending levels without expanding future income merely pulls demand forward. It borrows from tomorrow without increasing tomorrow’s ability to repay.

Too often, today’s borrowing falls into the latter category.

Summing It Up

Too many individuals, corporations, cities, states, school systems, and national governments continue spending tomorrow’s income today without a credible plan to grow that income meaningfully.

If borrowing does not create greater earning power tomorrow, the debt burden compounds — quietly at first, then exponentially.

History shows the likely outcomes:

• Inflate it away

• Default in some form

• Or endure a long period of slow growth and disciplined repayment

We saw inflationary “cheaper money” in the 1970s followed by recession. We saw asset bubbles in the early 2000s followed by collapse. Today, we see elevated debt combined with slower growth and tighter financial conditions.

That combination rarely resolves painlessly.

The math remains simple:

Debt that builds productive capacity can build wealth.Debt that sustains consumption without growth eventually demands repayment — one way or another.

The scale has grown since that warning ten years ago.

The arithmetic has not.

shorten it without weakening it, and take out the words summing it up and jsut make it flow

Ten years ago, Managing Debt in an Overleveraged World warned that global debt had surged by roughly $60 trillion after the financial crisis — a 75% jump relative to global GDP. At the time, that felt staggering. The world had failed to deleverage and instead chose to borrow more in the name of recovery.

Today, that warning looks modest.

Global debt has climbed beyond $300 trillion. U.S. federal debt sits at record peacetime levels. China’s credit expansion reshaped its financial system. Corporations loaded up during years of artificially suppressed rates. Households stretched to afford inflated assets.

We didn’t solve the problem. We scaled it.

And now we face those elevated debt levels in a different environment: higher interest rates, slower growth, and persistent structural deficits.

The composition of debt still matters. Excessive household debt tied to asset prices can quickly crush consumption when markets turn. Government debt rarely implodes overnight, but rising interest costs steadily erode fiscal flexibility. Corporate leverage that looked harmless at 2% becomes restrictive at 6%.

Debt sustainability ultimately depends on nominal growth — real growth plus inflation. For years, policymakers relied on near-zero rates to support expansion. When inflation surged, rates reset higher. Now debt service costs are rising while growth is moderating.

Cheap money created the illusion of permanence. That illusion is gone.

The real dividing line remains simple: debt used to fund productive investment can generate returns that exceed its cost. Debt used to sustain consumption without expanding future income merely pulls demand forward.

Too many individuals, institutions, and governments continue spending tomorrow’s income today without a credible plan to grow that income. When borrowing fails to increase earning power, the burden compounds — quietly at first, then exponentially.

History offers three exits: inflate it away, default in some form, or endure a long period of slower growth and disciplined repayment.

The scale of the debt has grown dramatically over the past decade.

The math hasn’t.

Thing Two  

The Law Of The Holes

“If you find yourself in a hole, stop digging.”

That’s the law of holes. It dates back to 1911, when The Washington Post put it this way: “Nor would a wise man, seeing he was in a hole, go to work and blindly dig it deeper.” The point is simple and counterintuitive — you can’t dig yourself out of a hole. You can only dig deeper.

That principle applies directly to debt.

A decade ago, surveys showed roughly one in five Americans believed they would never get out of debt. That was alarming then. Today, the numbers remain troubling — and in some categories, worse. Credit card balances have climbed to record highs. Interest rates on those balances are at historic peaks. Student loan repayments have resumed after a long pause. Auto loan delinquencies are rising. “Buy now, pay later” has normalized installment debt for everyday purchases.

At the same time, there are still two very different Americas when it comes to debt.

On one side are households that adjusted after 2008, reduced leverage, built savings, and pay their credit cards off monthly. On the other are families squeezed by higher living costs, medical bills, housing affordability challenges, and stagnant real wage growth — often carrying balances at 20%+ interest.

Both realities exist at once.

The holidays only magnify the pressure. Retailers make spending frictionless. Online checkout removes the psychological pause. Promotional financing disguises true costs. It becomes easy to justify skipping a payment here or carrying a balance there “just this once.”

But math doesn’t take holidays off.

The good news: a meaningful share of Americans remain debt-free, and many households are more financially disciplined than they were fifteen years ago.

The bad news: younger borrowers in particular are navigating student loans, high housing costs, and easy consumer credit simultaneously. When minimum payments mask long amortization schedules and compounding interest, the depth of the hole isn’t always obvious.

And the lending system hasn’t exactly put down the shovels. Whether it’s federally backed mortgages, student loan programs, auto financing, or fintech installment products, access to debt remains abundant — even when incomes don’t justify it.

The solution isn’t complicated, but it is difficult:

• Face the numbers honestly.

• Stop adding new high-interest debt.

• Prioritize principal reduction.

• Align spending with income.

• Increase earning power wherever possible.

You don’t climb out of a hole by digging faster.

You climb out by stopping, stabilizing, and building upward.

Maybe it’s time we worried less about stimulus and more about shovel control.

Thing Three

Just A Thought  

"To find a fault is easy; to do better may be difficult." - Plutarch