Debt Is an Asset — But for Whom?

The Paradox We Don’t Talk About

We worry about debt. Governments, households, corporations — all loaded up with obligations that seem unsustainable. And yet, someone always wants to buy it.

That’s the paradox: what looks like burden on one side of the balance sheet is a source of wealth on the other. Every liability is someone else’s income stream. Every risk, someone’s asset.

So when we talk about “debt problems,” we’re really talking about distribution — of exposure, of power, and of reward.

Key question: What does it mean when the foundations of wealth are built on other people’s obligations?

Debt as the Infrastructure of Finance

We tend to think of infrastructure as physical — ports, pipelines, power lines. But debt is financial infrastructure. Without it, pension systems collapse. Markets stall. Liquidity dries up. Most economic activity stops before it starts. It enables:

• Governments to spend before they tax.

• Companies to expand before they earn.

• Individuals to live before they save.

In this sense, debt isn’t just a function of finance — it’s the plumbing.

Key question: If debt is infrastructure, who controls the pipes?

Ownership Is Leverage

Where debt resides shapes the system it underpins.The owner of the debt holds the risk — but also the influence.

• Japan owes over 200% of its GDP. But most of that debt is held domestically — by its central bank, financial institutions, and households. The result? Policy freedom, not dependence.

• Emerging markets with heavy foreign debt face the opposite: vulnerability to capital flight, FX volatility, and conditionality from lenders.

• The U.S. is a hybrid. Its debt is widely held — by domestic pensions, foreign central banks, and private investors worldwide. But because the dollar is the global reserve, it borrows on better terms than anyone else.

Ownership determines how much pressure a debtor can absorb — and who gets hurt when the system wobbles.

Key question: Are we measuring debt too much by size — and not enough by structure?

What the System Is Really Built On

In truth, the global financial order relies on debt not just to fund activity — but to anchor portfolios. Pension funds, insurers, sovereign wealth funds, central banks — they all hold debt as a “safe” asset.

It’s not just the promise of repayment that matters — it’s the belief that repayment is guaranteed. And that belief enables everything else: risk-taking, credit creation, and long-term planning.

But belief is fragile. Political standoffs, downgrades, defaults — even whispers of instability in a major bond market — ripple through the entire system.

Key question: What happens when the world’s most trusted assets become politically exposed?

Investors Aren’t Outside This System — They Are the System

Most investors don’t think of themselves as debt holders. But if you hold a pension, an annuity, or a low-risk portfolio — you are.

You’re not just betting on company earnings or market sentiment. You’re betting on sovereign stability. On fiscal credibility. On the long-term solvency of systems that most people don’t even think about.

And the returns you receive — via coupon payments, bond ladders, or balanced fund allocations — are downstream from the political economy of debt.

Key question: Are we investing in assets — or in assumptions about governments, voters, and global order?

Closing Thought: Stability for Some, Fragility for Others

The world doesn’t have a debt problem. It has a distribution problem — of ownership, risk, and return.

Debt is a claim. And like all claims, it can be safe for one party only if someone else bears the uncertainty.

So we circle back to the core idea: Every liability is an asset. But whose?

Final reflection: If debt is the foundation of modern finance, how well do we understand who stands on top — and who holds the ground?