Record debt in richest nations threatens global growth

For decades crushing debt has spread misery in the world’s poor and lower-income nations.

- PATRICIA COHEN

But the menace of unsupportable borrowing that now hangs over the global economy emanates from some of the richest countries.

Record or near-record debt in the United States, Britain, France, Italy and Japan threaten to hamstring growth and sow financial instability around the globe.

At home, it means countries must make interest payments with money that otherwise could have paid for health care, roads, public housing, technological advances or education.

The hunger for more and more loans has also pushed up borrowing costs, gobbling up a bigger share of taxpayer money. It can also push up rates on business, consumer and car loans, as well as mortgages and credit cards; and drive up inflation.

And perhaps most worrisome, overhanging debt — pumped up even when an economy is relatively sound and jobless rates are low, like the United States — gives governments less room to respond when things sour.

“You want to be able to spend big and spend fast when you need to,” said Kenneth Rogoff, a Harvard economics professor.