Revenge of debt

 Financial markets are fluctuating wildly due to the latest U.S. Consumer Price Index (CPI) and Producer Price Index (PPI). As stickier-than-expected inflationary pressure is confirmed, market expectations for rate cuts are dimming. Instead, fears of tightening are spreading with the sentiment that "further rate hikes are inevitable."

Why do we get so tense at the mere mention of "rate hikes"? It is because of the astronomical "debt" weighing down the global economy.

U.S. Debt at $40 Trillion—Annual Interest Alone Reaches 1,000 Trillion KRW! Look at the U.S., the world's largest economy. According to official figures from the U.S. Department of the Treasury, the federal debt has surpassed $40 trillion for the first time in history. Net interest payments alone amount to approximately $882 billion annually—a staggering 1,180 trillion KRW. With the 10-year Treasury yield hovering around the 4% range, additional rate hikes are pushing national finances deeper into an interest trap.

Europe’s crisis is also deepening. Total Eurozone debt exceeds 13 trillion euros. Converting the debts of major nations into Korean Won: Germany’s debt is about 4,000 trillion KRW with annual interest of roughly 57 trillion KRW; France’s debt stands at around 5,000 trillion KRW with interest of about 78 trillion KRW; and the UK, with roughly 5,000 trillion KRW in debt, must bear around 140 trillion KRW in interest every year. If interest rates rise further, this burden will grow even more crushing.

Europe and Japan Falling into Fiscal Deficits Japan's national debt has reached 1,310 trillion yen. Following the termination of negative interest rates, the 10-year government bond yield shot up to around 1%. A mere 1 percentage point increase in interest rates will cause its annual interest burden—previously at around 85 trillion KRW—to snow-ball rapidly.

Is South Korea safe? In 2026, South Korea’s national debt is projected to reach 1,415 trillion KRW, with the debt-to-GDP ratio expected to exceed 50% for the first time in history. Driven by rapid debt accumulation and high interest rates, interest payments on government bonds next year alone will approach up to 36 trillion KRW.

Rate hikes, though inevitable to curb inflation, are returning as interest rate landmines for national finances. Meanwhile, ordinary citizens are suffering a double blow from skyrocketing inflation and rising interest costs.

Politicians and public officials must treat public finances as if it were their own money. They must repeatedly ask themselves, "If this were my own money, would I spend it like this?"

As the old Korean proverbs say, "If it's on credit, one would even slaughter an ox" and "Debt lasts for three generations."

Spending money may feel sweet at the moment, but accountability always follows.

Thank you.

#Debt #Revenge #Inflation #Pain #Responsibility