Macroscope | Why dangerous debt dynamics aren’t catching up with economic policy

As the Institute of International Finance reported on February 25 in its latest Global Debt Monitor, nearly US$7 trillion was added to global debt in 2024, taking it to a record annual high of US$318 trillion. Economic growth slowed as the ratio of global debt to gross domestic product rose for the first time in four years to 328 per cent. In 2025, government debt borrowing is set to remain high, especially in the US, France, China, India and Brazil.

The report is titled, rather ominously, “Return of the Bond Vigilantes – Dangerous Dynamics in Debt Markets”. Bond vigilantes are investors who sell or threaten to sell bonds to protest against government policies, in hopes of forcing governments to be more fiscally responsible. They often emerging at times such as now when public debt is surging.

Meanwhile, equity markets have taken on an otherworldly quality with their seeming imperviousness to what is happening in the real world of political economy. Can warnings of dangerous debt dynamics and stagflation end their complacency?

Or have they simply been allowed to become too big to fail? Have we made a monster in the form of markets that have become a force unto themselves and no longer reflect, but rather dictate, the course of their economies?