The limit of government debt (Public debt of developed countries — 21 st century)

The paper offers a new perspective on the limit of government debt. It surveys the broad historical picture of the dynamics and character of government debt in the leading economies: the ratios of debt and debt service to GDP have risen to levels close to their half­century highs. In the regime that has taken shape after 2022, the limit manifests itself not on the notional scale of the debtto­GDP level, but on the scale of price. The limit is tied to the critical servicing rate, beyond which debt growth becomes self­reinforcing, and is specific to each country in a given period. Placing the current debt within a historical sequence, we systematize the mechanisms for unwinding the debt burden and show that reserve issuers have limited room to use them today. The holder structure plays the key role: after 2022 central banks stopped reinvesting maturing bonds, budget deficits led to new issuance, and the interest rate risk that had been held for some fifteen years on price­insensitive balance sheets returned to market investors, who demand a premium for bearing it. This is formalized through the debt buffer — the gap between the critical and the market­required rates computed for the six largest advanced­economy borrowers. The calculations show that the limit of debt burden is not fixed: it descends toward the actual level of debt as the investor role of central banks recedes. The market pressure of 2024—2026 works through the rising cost of debt service.