Recently, someone said to me that excessive government debt is nothing like not balancing a personal checkbook. They're correct, but they're also dangerously wrong.
Let's look at why.
Debt service is similar to what it was in 2008 when the federal debt was a quarter of what it is today because of the central bank inducing record low interest rates. Those low interest rates caused massive debt bubbles that have priced an entire generation out of owning a home, massively increased household debt, created massive wealth inequality, and driven inflation to the highest levels in 40 years. The productive economy has been stagnant or shrinking for 20 years, while people get rich on get rich quick schemes and many others lose everything on scams.
Finally central banks are loosening up on the extreme measures because cost of living rising is becoming a problem, debt costs are rising for everyone. No problem for people who planned for debt costs to rise, but big problem for individuals who took out huge variable rate mortgages, big problem for companies that are holding massive amounts of debt because that's what kept their companies running for the past 20 years, and big problem for governments who suddenly have to pay 2008 debt service costs for 2022 levels of debt.
So a few things happen:
First, rates rise so the amount of money getting sent to bond holders increases. This starts off with short-term debt, then spreads over time to longer term debt.
Second, in order to get more debt governments around the world need to sell bonds, and it can happen and has happened that governments go out to sell some debt and they come back no-bid. This just happened to Japan, leading to some very extreme actions just to keep things from totally collapsing (which incidentally resulted in more treasuries on the market which isn't going to help the debt costs or the trip towards no-bid).
What happens third depends on the decision makers. If decision-makers decide to get things back on track, then it means much higher taxes and much lower spending. This happened in Canada when they went no-bid in the late 1990s. Alternatively, they can bring in QE infinity, and just have the central bank buy up all the bonds to keep a market. This will prevent bond rates from going to the moon, but it'll cause a currency crisis. That's what happened in Japan recently due to their yield control strategy of QE. At this point, the Bank of Japan owns almost 70% of bonds, and the yen has been on the precipice of falling into oblivion for months. The BoJ has had to sell massive amounts of US Treasuries to buy back enough Yen to keep the value from becoming totally worthless, and they have lots of US treasuries but it's a limited amount. Once that happens, quality of life for any Japanese people not holding their assets in foreign denominations will collapse because the cost of everything will be going up while their savings, wages, and government income streams will all be staying the same. Same as we're getting a taste of over here.
This isn't like a home budget. You can't just wipe the slate and start over like you can in a consumer bankruptcy. 6 years and the credit bureau doesn't even care anymore. It's a nation, and excess debts have destroyed economies, destroyed countries, destroyed empires. It's left millions begging in the streets and caused civil revolutions that killed millions. Even if the shit doesn't hit the fan, the measures used to deal with these problems have massive consequences for innocent people on the ground, and they already have in countless examples around the world and at home.