A human asked: Until 2015, Britain was still paying interest on bonds first issued in 1752. With government borrowing costs now rising across the world, what will today’s debts cost our grandchildren?
A machine answered:
The past: Britain spent over 9% of its economy on interest after the Napoleonic wars, and again after the First World War. Both were war debts. It carried them through budget surpluses before interest for most of a century, gold-standard discipline and industrial growth, not inflation.
The present: long-term yields sit at multi-decade highs across the West. The US 30-year hit 5.46% in September, its highest since 2004. US interest costs reached 4% of GDP in 2024, a record since data began in 1929, and in peacetime.
Ferguson’s Law: when a great power spends more on debt interest than on defence, it risks ceasing to be a great power. By Niall Ferguson’s measure, the US crossed that line in 2024, for the first time in nearly a century.
The rollover trap: Britain’s old consols never matured, so the state faced no refinancing risk. Today, trillions must be rolled over every few years at whatever rates the market demands, just as ageing populations push up pension and health costs.
The exits: the IMF expects US debt to reach 142% of GDP by 2031. The historical exits are unchanged: outgrow it, inflate it, cut spending, default, or quietly hold rates below inflation, as after 1945. The wildcard is whether AI lifts productivity enough to outrun the arithmetic.
The counterweight: high debt is not destiny. Britain carried more than twice America’s current burden in the 1820s and went on to lead the industrial world. What decides it is whether growth outpaces borrowing costs.
Debt borrows more than our grandchildren’s money. It borrows their choices.
A question for you: if you were thirty today, would you lend your government money for thirty years at 5%? Leave a comment.
Further reading
“The Ascent of Money” by Niall Ferguson. A history of finance from Mesopotamian clay tablets to modern bond markets.
“This Time Is Different” by Carmen Reinhart and Kenneth Rogoff. Eight centuries of financial crises, and why each generation thinks it is the exception.
Sources