Other People's Debt: Why Your Money Is Backed by Government IOUs (and Bitcoin Isn't)

Every pound, dollar and euro you hold is someone else's debt. A banknote is a liability of the central bank that issued it. The balance in your bank account is a liability of your bank. And the main asset standing behind both is the government's own debt. On 17 September 2026 the Bank of England put it in writing: under its new framework, its banknotes “will be backed primarily by UK government bonds”.

So the state of government finances is not someone else's problem. On 29 September 2026 the United States owed $40,096,954,633,566, more than four times what it owed on the day Lehman Brothers failed. UK public sector net debt is £2,985.5 billion. Euro-area governments owe €14.24 trillion, and Japan's central government ¥1,347 trillion. Australia's federal debt is 17 times what it was in 2008; New Zealand's net debt has more than tripled since 2019.

This article sets out the latest official figures, country by country. It explains why the system rewards borrowing and makes inflation the goal, who holds the debt and who pays when it goes wrong, and how debts like these have been dealt with before. Then it explains what is different about Bitcoin: money that is nobody's liability, issued on a schedule no committee can change. Every figure is dated and linked to its primary source.

Your money is someone else's liability

Every Bank of England note carries the words “I promise to pay the bearer on demand the sum of…”. The Bank explains that the wording dates from when its notes represented deposits of gold. Today the promise can only be kept with another note of the same value.

On the Bank's books a banknote is a liability: about £99 billion of notes are recorded on its balance sheet, its largest liability after the reserves commercial banks hold with it. By law those notes must be matched by assets. Under the new framework, those assets will mainly be gilts: UK government bonds, the state's promise to repay.

The money in your bank account is one step further removed. As a Bank of England paper put it in 2014, “Commercial banks create money, in the form of bank deposits, by making new loans.” Your deposit is your bank's liability. Your bank's reserves are the central bank's liability. And the central bank's assets are mostly government debt, which the government repays from future taxes or from new borrowing.

How fiat money is actually created →

The Federal Reserve's balance sheet shows the same structure at a larger scale. On 23 September 2026 it owed $2.43 trillion of banknotes and $2.97 trillion of bank reserves: dollars. It owned $4.56 trillion of US Treasury securities and $1.91 trillion of mortgage-backed securities guaranteed by government agencies and government-sponsored enterprises. Together those are 96% of everything it owns (Federal Reserve, H.4.1).

That is what the title means. Your money is other people's debt, and it is someone else's asset. Every government bond is an asset to whoever holds it: pension funds, banks, insurers, foreign governments and central banks. Government debt is the collateral the financial system rests on, which is why its sustainability matters to everyone who holds the currency.

The debt, country by country

Below are the latest official figures for each economy, from its own statistics office, treasury or central bank. National definitions differ (gross or net, central or general government), so the chart compares countries on one IMF definition.

United States

• Total federal debt: $40,096,954,633,566 on 29 September 2026. It first closed above $40 trillion on 18 August 2026. It was $9.63 trillion on 15 September 2008 and $23.17 trillion on 2 January 2020 (US Treasury, Debt to the Penny).
• Growth: $2.59 trillion in the past year: about $7.1 billion a day, or a new trillion every 141 days.
• As a share of the economy: debt held by the public, the measure the Congressional Budget Office uses, was 99.4% of GDP at the end of fiscal 2025. Under current law the CBO projects it will pass its 1946 record of 106% in 2030, reach 120% by 2036 and 175% by 2056 (CBO).
• Interest: $1,017 billion of net interest in the 11 months to August 2026, against $876 billion for national defence. Over the whole of fiscal 2025, interest ($970 billion) already cost more than defence ($917 billion). The average rate on marketable Treasury debt has risen from 1.42% in January 2022 to 3.48% in August 2026, and keeps rising as cheap debt is refinanced (Monthly Treasury Statement).
• Credit: Moody's cut the United States to Aa1 on 16 May 2025. For the first time, none of the three largest rating agencies rates it AAA.

United Kingdom

• Public sector net debt: £2,985.5 billion at the end of August 2026, 93.8% of GDP: levels last seen in the early 1960s, according to the Office for National Statistics. It was 35.5% in 2007–08.
• Borrowing: £134.3 billion in 2025–26, 4.4% of GDP.
• Interest: £39 billion in 2019–20; £106 billion in 2024–25. The Office for Budget Responsibility forecasts £109.4 billion in 2026–27: 8.4% of everything the government collects.
• Inflation risk: a quarter of the UK's debt portfolio (25.2%) is index-linked, about twice the share of the next G7 country, so inflation feeds straight into the interest bill. The OBR estimates that one extra percentage point of inflation adds £7.3 billion to interest costs in 2026–27.
• Markets: the Bank of England's fitted 30-year gilt yield reached 6.02% on 15 September 2026; the 20-year yield that day was the highest since February 1998.
• The long run: in its July 2026 report the OBR projects that, on current policies, net debt would rise from about 95% of GDP in 2030–31 to around 300% by 2075–76. It calls that path unsustainable: policy would have to change before it got there (OBR, Fiscal risks and sustainability).

The euro area

• Government debt: €14.24 trillion at the end of March 2026, 88.9% of GDP across the 21 euro countries (Bulgaria joined in January). For the whole EU: €15.70 trillion, 82.9% (Eurostat).
• Highest ratios: Greece 143.5%, Italy 138.9%, France 117.6%, Belgium 109.1%, Spain 101.6%. Germany: 64.4%.
• France: debt reached 119.0% of GDP by June 2026 (INSEE) after a deficit of 5.1% of GDP in 2025. Fitch cut its rating to A+ in September 2025 and S&P followed in October. In November 2025 the European Central Bank noted that Italian government bond yields had fallen below French ones for the first time since 2003.
• Interest: euro-area governments paid €303 billion of interest in 2025, up from €182 billion in 2021 (1.4% to 1.9% of GDP). Italy alone paid €87 billion, 3.9% of its GDP.
• Germany, long the anchor, changed its constitution in March 2025 to exempt defence spending above 1% of GDP from its debt brake and to allow a €500 billion fund for infrastructure. The Bundesbank warns its debt ratio could approach 90% by 2040.

Japan

• Central government debt: ¥1,346.7 trillion at the end of June 2026 (Ministry of Finance). On the IMF's measure, general government gross debt is 206.5% of GDP, the highest of any major advanced economy.
• Its own central bank owns 46.7% of its government bonds (excluding Treasury bills), down from a peak of 53.9% in September 2023 as the Bank of Japan slowly buys less (Bank of Japan, Flow of Funds).
• Yields are rising as it steps back: the 10-year yield reached 3.082% on 28 September 2026, the highest since August 1996, and the 30-year reached 4.131% on 1 September 2026, a record in a series that starts in 1999.
• Debt service takes 25.6% of Japan's 2026 budget, which now assumes a 3.0% interest rate, up from 2.0%.

Canada

• Federal debt: C$1,322 billion at the end of March 2026 (unaudited), about 41% of GDP (Finance Canada). That is only the federal government: the IMF's figure for all levels of government is 113.5% of GDP, although Canada's net debt is far lower because its public pension plans hold large assets.
• Debt charges are forecast at C$58.7 billion in 2026–27, rising to C$80.9 billion by 2030–31.
• The Bank of Canada held C$435 billion of government bonds at the peak of its quantitative easing in December 2021. It lost C$5.65 billion in 2023 alone, and its equity is still negative.

Australia

• Commonwealth gross debt: A$971.4 billion at 30 June 2026, 33.2% of GDP (Final Budget Outcome 2025–26). In 2007–08 it was A$55 billion, and the Commonwealth held more financial assets than debt: net debt of minus A$40 billion.
• Low, but rising: by international standards that is low, and as a share of GDP it has fallen for four years. But it is still rising in dollars, to A$1.25 trillion by June 2030, and the 2026–27 Budget names public debt interest as the fastest-growing major payment over the medium term: A$31.9 billion this year, A$46.9 billion by 2029–30.
• The states are borrowing harder. The Parliamentary Budget Office puts state and territory gross debt at A$649 billion in 2026–27; Victoria's net debt alone is A$165 billion. Across all levels of government, gross debt will reach A$2.03 trillion, 58% of GDP, by 2029–30, above its pandemic-era peak of 57.8%.
• The Reserve Bank bought A$281 billion of bonds in 2020–22. When rates rose, its equity went negative: minus A$12.4 billion in June 2022, and still minus A$5.3 billion in June 2025.

New Zealand

• Net core Crown debt: NZ$186.7 billion at 30 June 2026, 41.0% of GDP, against NZ$57.7 billion (18.6%) in 2019 (NZ Treasury, Pre-election Economic and Fiscal Update). The Treasury expects it to peak at 43.9% of GDP in 2027–28.
• Finance costs: NZ$10.3 billion forecast for 2026–27.
• The Reserve Bank bought NZ$53.5 billion of government bonds in 2020–21 under a Crown indemnity. The Crown has since paid it a net NZ$9.9 billion to cover the losses.

The world

• Governments worldwide owed $106.7 trillion at the end of 2025, out of more than $365 trillion of debt of all kinds by mid-2026 (Institute of International Finance).
• The IMF puts global public debt at 93.9% of world GDP in 2025, and projects 100% by 2029 (IMF, Fiscal Monitor).
• OECD governments borrowed a record $17 trillion in 2025. Their interest bill has reached 3.3% of GDP.

Why do governments print money if it causes inflation? →

Why the system rewards debt and inflation

None of this is an accident of bad management. The way money is created, and the goals central banks are set, reward borrowing and make inflation the default. Five features do the work.

1. Money is lent into existence

Almost all money is created by lending. “Commercial banks create money, in the form of bank deposits, by making new loans,” the Bank of England explains, and “the repayment of bank loans destroys money” (Bank of England, 2014). Central banks create their money by buying assets, mostly government bonds. So the money supply can only grow if debt grows. Pay the debts down and the money disappears with them.

Governments behave accordingly. The United States last ran a budget surplus in fiscal 2001 (OMB), the United Kingdom in 2000–01 (OBR). Both have borrowed every year since, and US federal debt has been higher at the end of every year since 2000.

2. Inflation is the target

Central banks do not aim for stable prices. They aim for prices to rise. The Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan and the Bank of Canada all target 2% a year; New Zealand's target is 1–3% and Australia's 2–3%. At 2% a year, money loses half its value in 35 years. And when central banks miss, they can miss by a lot: in 2022 inflation reached 11.1% in the UK, 9.1% in the US and 10.6% in the euro area.

3. Inflation pays the borrower

Inflation shrinks the real value of a debt, which helps whoever owes the most, and governments owe the most. Between mid-2020 and early 2023 US federal debt grew by $5.0 trillion, yet its ratio to GDP fell from 133% to 116%: inflation and the recovery from the 2020 slump lifted the economy's money value faster than the debt grew (FRED).

4. Central banks keep government borrowing cheap

When debts are large, central banks have repeatedly held down what governments pay to borrow. In April 1942, at the Treasury's request, the Federal Reserve pegged Treasury bill rates at 3/8% and capped long-term bond yields at 2.5% so that the government could borrow more cheaply; it took the Treasury–Fed Accord of 1951 to end it (Federal Reserve History). From September 2016 to March 2024 the Bank of Japan bought government bonds to hold the 10-year yield “around zero percent” (Bank of Japan). In March 2020 the Reserve Bank of Australia did the same for three-year bonds, at 0.25% (RBA).

And when the central bank owns the bonds, the interest comes home. In 2021 the Federal Reserve earned $122 billion of interest on securities bought with money it had created, paid $5 billion on the reserves it had created to buy them, and sent $107 billion back to the Treasury (Federal Reserve). While rates stayed low, the government was in effect borrowing from its own bank, almost for free.

5. New money reaches some people first

New money does not arrive everywhere at once. It reaches banks, bond markets and the owners of assets first, and wages and prices last. When the Bank of England studied its own quantitative easing in 2012, it found that QE had pushed up asset prices and the value of households' financial wealth, but that “the top 5% of households” held 40% of those assets (Bank of England, 2012).

• Who gains: the biggest borrower, which is the state; the first users of new money, banks and markets; and the owners of assets.
• Who pays: savers earning less than inflation, workers whose wages trail prices, and anyone holding cash.

And the issuer itself cannot go bust. As the next section shows, central banks have lost hundreds of billions on their bonds since 2022, and carried on, because the losses fall on taxpayers. They hold the cards; everyone else holds the risk.

The Cantillon effect: who gains first from new money →

Who holds the debt, and who pays when it goes wrong

Since 2008, and above all since 2020, the largest new buyer of government debt in most Western countries has been the country's own central bank. Quantitative easing meant buying government bonds with newly created reserves: new money.

• The Federal Reserve added $3.25 trillion of Treasuries between March 2020 and June 2022.
• The Bank of England's purchases peaked at £875 billion of gilts in February 2022.
• The Eurosystem still holds €2.9 trillion of government bonds bought for monetary policy.
• The Bank of Japan owns nearly half of Japan's government bonds.
• The Reserve Bank of Australia bought A$281 billion, the Bank of Canada held C$435 billion at its peak, and the Reserve Bank of New Zealand bought NZ$53.5 billion.

When inflation arrived and interest rates rose, the arithmetic turned. Central banks pay interest on the reserves they created, at today's higher rates, while the bonds they bought still pay the low rates of 2020 and 2021. The bonds also fell in value. The losses land on the public:

• United Kingdom: the Treasury indemnifies the Bank of England's purchases. The OBR expects the scheme to cost taxpayers £164 billion over its life (OBR).
• United States: the Fed records its losses as a “deferred asset”, $233 billion on 23 September 2026, which it must earn back before it sends the Treasury any profit again.
• Euro area: the ECB lost €7.9 billion in 2024; the Bundesbank has carried forward losses of €27.8 billion.
• Australia, Canada and New Zealand: the Reserve Bank of Australia and the Bank of Canada have had negative equity, and New Zealand's government has paid its central bank NZ$9.9 billion.

Follow the circle. A government borrows. Its central bank buys the bonds with new money. When that goes wrong, the government covers the loss, by borrowing more. Other people's debt, all the way down.

Who controls the money supply? →

Why the arithmetic keeps getting harder

A debt is sustainable as long as lenders believe it will be repaid in money worth roughly what they lent. Three things are working against that belief.

Interest is compounding. For a decade after 2008, governments refinanced at near-zero rates. Those years are over. The US now spends more on interest than on defence. The UK spends 8.4% of its revenue on interest, Japan a quarter of its budget on debt service, and Australia's interest bill is its fastest-growing major payment.

Rates are above growth. When the average interest rate on a debt is higher than the economy's growth rate, the debt grows faster than the economy unless the government runs a surplus before interest, and few Western governments do. If policy does not change, the CBO projects US debt held by the public at 175% of GDP by 2056, and the OBR projects UK net debt at around 300% by the 2070s.

The buyer of last resort is stepping back. The Bank of Japan, the Bank of England and the Eurosystem are shrinking their holdings, so private investors must absorb more bonds, at higher yields: about 6% on 30-year gilts, and more than 3% on 10-year Japanese bonds for the first time since 1996.

Projections are not forecasts. Long before debt reached 300% of GDP, something would give. The question is what.

Four ways out, and the one history keeps choosing

A government with more debt than it can comfortably carry has four options. It can grow faster than the debt. It can run surpluses and pay it down. It can default or restructure. Or it can let inflation shrink the debt's real value, ideally while holding interest rates below inflation so that lenders cannot escape.

The first three are slow, painful, or have to be chosen out loud. The fourth needs no vote, and it is the one history keeps choosing.

After the Second World War, UK net debt was 251.7% of GDP in 1946–47; by 1979–80 it was 39.1% (OBR, Public finances databank). US federal debt held by the public fell from 106.1% of GDP in 1946 to 23.2% in 1974. Growth helped. So did something less visible: interest rates held below inflation. Carmen Reinhart and Belen Sbrancia estimate that this ‘liquidation’ of debt was worth 3.6% of GDP a year to the UK and 3.2% to the US between 1945 and 1980, and UK real interest rates were negative in nearly half of those years (NBER Working Paper 16893). Bondholders and savers paid for it, in purchasing power.

It happened again, on a smaller scale, after 2020, as the US figures above show.

That is the quiet cost of keeping your savings in other people's debt. When a debt becomes too large to repay honestly, the money it backs is the release valve.

The cost-of-living crisis is a currency crisis →

What Bitcoin changes

A bitcoin is not a promise. No issuer owes it to you, no counterparty's solvency stands behind it, and it sits on nobody's balance sheet as somebody else's liability. Holding it is not lending to anyone. Gold shares that property; no currency in use today does. Bitcoin adds two things gold cannot: a supply fixed in advance, and the ability to be sent anywhere in minutes.

What backs bitcoin? →

Protocol, not policy. The supply of bitcoin is not set by a committee. It is set by the protocol: 50 bitcoin per block at the start, halving every 210,000 blocks, approaching a limit of 21 million. Every computer running the software checks every block against that schedule and rejects any block that breaks it. There is no inflation target, and no one can lend bitcoin into existence. No committee can vote to create more to buy a government's bonds, recapitalise a bank or cover a deficit. New coins go only to the miners who secure the network, on a schedule anyone can check. Changing the limit would need the people who run the software to adopt the change, and they are the people it would dilute.

The schedule has run since 3 January 2009. On 9 March 2026, block 939,999 brought the number of bitcoin issued to 20 million. At block 969,428, on 1 October 2026, 20,091,965 had been issued: 95.7% of all there will ever be. New issuance is 3.125 bitcoin per block, about 164,000 a year or 0.8% of the supply, and it halves again at block 1,050,000, expected in 2028.

See the 21 million schedule, block by block →

Set that against the figures above. A government's debt can grow by $7.1 billion a day; a central bank can buy £875 billion of bonds with money it creates. Bitcoin's supply cannot respond to either. That is the point: it is money whose value does not depend on anyone's ability to repay.

What Bitcoin does not fix

• It does not make existing debts disappear. Governments will still have to choose among the four ways out.
• Its price in pounds or dollars is volatile and has fallen by half or more within a year several times. Money you will need soon does not belong in it (why bitcoin is volatile).
• Holding it safely is your responsibility. There is no bank to call (the self-custody guide).
• It is a long-term savings technology, not a trade on the next headline.

What it changes is the choice. For the first time, savers can hold a monetary asset that is not someone else's liability and cannot be diluted to pay someone else's debts. If enough of them do, inflation stops being a quiet way out, and governments are left with the choices that have to be made in the open.

Fix the money, fix the world →

What to do with this

• Know what you hold. Cash, deposits and bonds are claims on other people's debt. That is not a reason to panic. It is a reason to measure your savings by what they can buy, not by the number on the statement (what everyday prices have done, in pounds, dollars and sats).
• If you decide some savings belong in bitcoin, learn first, buy on a schedule rather than all at once, and hold your own keys (the free course; the DCA calculator).

This article explains how money works. It is not financial advice.

Sources

Figures are as published on 1 October 2026, and each is dated where it appears. The film's transcript lists the source of every line.

• United States: Treasury, Debt to the Penny; Monthly Treasury Statement; Average interest rates; Federal Reserve H.4.1, 24 September 2026; CBO, The Budget and Economic Outlook: 2026 to 2036; CBO, long-term budget outlook data; OMB Historical Tables.
• United Kingdom: ONS, Public sector finances, August 2026; OBR, Economic and fiscal outlook, March 2026; OBR, Fiscal risks and sustainability, July 2026; HM Treasury, Debt Management Report 2026–27; Bank of England, “The promise to pay: what backs banknotes?”; Bank of England, banknote FAQs; OBR, Economic and fiscal outlook, November 2025 (APF).
• Euro area: Eurostat, government debt, Q1 2026; Eurostat, EDP notification, April 2026; INSEE, Q2 2026; Istat; ECB, APP and PEPP; ECB, annual accounts 2024; Bundesbank, annual accounts 2025.
• Japan: Ministry of Finance, central government debt; JGB interest rates; FY2026 budget; Bank of Japan, Flow of Funds.
• Canada: Fiscal Monitor, March 2026; Spring Economic Update 2026; Bank of Canada, balance sheet; Bank of Canada, financial statements 2025.
• Australia: Final Budget Outcome 2025–26; Budget Paper No. 1, 2026–27; PBO, National Fiscal Outlook 2026–27; RBA, Bond Purchase Program review; RBA, Annual Report 2025.
• New Zealand: NZ Treasury, PREFU 2026; RBNZ, LSAP indemnity transfers.
• Why the system rewards debt: Bank of England, Money creation in the modern economy (2014); Bank of England, The distributional effects of asset purchases (2012); Federal Reserve, Statement on Longer-Run Goals; Federal Reserve, Reserve Bank income for 2021; Federal Reserve History, The Treasury-Fed Accord; Bank of Japan, yield curve control (2016); RBA, Review of the Yield Target; ONS, CPI; Eurostat, HICP; OMB, Table 1.1.
• Global and history: IMF, Fiscal Monitor, April 2026; IMF, World Economic Outlook database; IIF, Global Debt Monitor; OECD, Global Debt Report 2026; OBR, Public finances databank; Reinhart & Sbrancia, The Liquidation of Government Debt.
• Bitcoin: issuance computed from the protocol's schedule at block 969,428; block heights and times from the chain (mempool.space).