The nature of global economics is complex, layered and ever-evolving. Old patterns and trends may disappear only to re-emerge in a new structure. Today, many concerned economists turn their attention to the United States' seemingly unending expansion of national debt. By examining previous historical precedents such as the Ottoman Empire, they draw conclusions about the potential risk attached to this persistent increase in borrowing.

A Historical Parallel: The Economic Crisis of the Ottoman Empire

On October 6, 1875, the Ottoman Empire hit a financial crisis benchmark by suspending its interest payments on loans. The total amount defaulted on was a hefty sum of 224.5 million British Pounds. To offer context, an equivalent amount in 2019 stands at around £21,654,285,714. The entire income of the Empire at the time, however, was just 21.7 million British pounds (£2,190,666,667 in 2019). This tumultuous time in Ottoman history gives us clues into the possible implications of an excessive debt-to-income ratio.

The United States’ Debt

Cutting to the present day, as of 2022 the US debt-to-income ratio sat around 7.8. Given this rate, the US could theoretically continue to borrow up to an estimated $50 trillion. With a current debt of around $33 trillion, which is approximately 33% of the global economy, the acceleration of borrowing raises concerns. This rapidly increasing debt total - with a growth rate of 50% every five years - suggests that the debt would double every decade.

Future Predictions: The Potential for Default

If this trend continues, the US is on track to fully utilise its borrowing capacity by 2028. Many variables might affect this outlook, such as the nation's ability to significantly increase its revenue or decrease its spending.

Since the US net foreign debt as a nation is sitting at $25 trillion (close to the whole US GDP), I'm doubtful the government has any ability to raise revenue domestically anymore.

However, the potential repercussions of defaulting on such an enormous amount of debt are enormous and could ripple throughout the global economy.

Lender's Dilemma: Who Would Lend That Much?

As the US debt nears its potential limit, lenders might become increasingly wary of adding more to the enormous total. Logic dictates that lenders would be hesitant to contribute to such a high-risk scenario. The issue is not limited to national banks; international lenders may also think twice due to both economic and political considerations.  The potential repercussions of this growing hesitation amongst lenders could lead to a drying up of credit sources for the US, creating further complications.

The Lesson from Ottoman Empire

What happened to Ottoman after the default was the total debt was reduced to half the amount. And the nation paid up to hte 90% of remaining debt over 30 years. That happened in the meanwhile foreign interventions namely British and French presence in the country to raise taxation by any mean possible.

What would be the likely scenario to US? Their massive foreign military operation will be downsized. And the government's technological assets would be sold such as NASA. With depreciation of the assets, American companies will be cheap relatively speaking for foreign buyers. Right now, US funding towards higher education is high, but that'll be reduced also. Welfare spending would be cut also.

It's easy to imagine, this scenario proves the worst for the people, leading to massive continuous uprising.

The Bottom Line

As we draw parallels between the economic downfalls of the Ottoman Empire and the potential future of the US, it's clear that the implications of increasing national debt are significant. The path that the US is currently on, with rapidly expanding debt without proportionate growth in revenue, is a perilous one. Managing and decreasing this astronomical debt will require robust fiscal policy changes and disciplined spending behaviours. The lessons of history always offer us guidance, and in this case, the tale of the Ottoman Empire is a cautionary one about the risks of excessive borrowing.