The more indebted the world becomes, the more sensitive it is to interest-rate rises. To assess the effect of borrowing and higher rates, The Economist has estimated the interest bill for companies, households and governments across 58 countries. Together these economies account for more than 90% of global GDP. The total debt in these countries stands at $298 trillion, or 342% of their combined GDP. In 2021 their interest bill stood at a $10.4 trillion, or 12% of combined GDP. By 2022 it had reached a whopping $13 trillion, or 14.5% of GDP.
If rates follow the path priced into government-bond markets, the interest tab will hit around 17% of GDP by 2027. Another percentage point, on top of that which markets have priced in, would bring the bill to a mighty 20% of GDP. Such a bill would be big, but not without precedent. Interest costs in America exceeded 20% of GDP during the global financial crisis of 2007-09, the economic boom of the late 1990s and the last proper burst of inflation in the 1980s.