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IPFS News Link • Government Debt & Financing

Interest on the Debt Will Exceed Defense Budget This Year

•, By Simon Black

The world had been at war with itself for nearly a decade. And though the conflict became officially known as the Seven Years War, it might as well have been called 'World War Zero' because it involved just about every major power on the planet.

France, Russia, Britain, Spain, Portugal, and Prussia in Europe, the Mughal Empire in India, and even the Ojibwe and Cherokee tribes in North America, all fought in the war. And the conflict cost everyone dearly.  Especially France.

France was still technically the West's dominant superpower at the war's start in 1756; however, decades of overspending had taken a toll… and French finances were showing signs of strain.

As the Seven Years War raged on, France had to borrow more and more money to pay for it. So both the national debt, as well as its annual interest bill, rose quickly.

By the end of the war, the debt had grown so much that France was spending over HALF of its annual budget just to pay interest… which means obviously they were spending more on interest than on the military.

Economic historian Niall Ferguson has famously commented on this critical milestone:

"If you really want to see when an empire is getting vulnerable, the big giveaway is when the costs of servicing the debt exceed the cost of the defense budget."