War and the Global Economy: Rising Debt, Policy Failures, and the Fear of Conflict in 2025

Rajiv Shah

The global economy in 2025 is at a breaking point. Unprecedented national debts, failed economic policies, inflation, and geopolitical conflicts are driving nations into financial distress. Developed economies are burdened by unsustainable fiscal policies, while developing nations struggle with capital flight and economic instability.

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As countries face widening wealth gaps, inflationary pressures, and political turmoil, many are questioning the effectiveness of past economic policies.

Meanwhile, rising global tensions and military conflicts threaten to push the world into further chaos, prompting a strong push for diplomacy over war.

This article examines the failures of economic policies over the last decade, the global debt crisis, and the shifting power dynamics as nations attempt to counter financial collapse and geopolitical instability.

The Global Debt Crisis: A Ticking Time Bomb

Debt Levels of Major Economies in 2025

• Global public debt reached a record US$97 trillion in 2023.

The global debt stock surged by over $12 trillion in the first three quarters of 2024, reaching nearly $323 trillion.

Key Concerns from Rising Debt

• Higher Interest Payments – Countries with high debt levels, especially the U.S. and Japan, are struggling to manage soaring interest payments.
• Weak Economic Growth – The world’s largest economies are barely growing at 1-2% annually, making debt repayment more difficult.
• Currency Depreciation – Several developing nations are seeing their currencies weaken against the U.S. dollar, worsening their external debt burdens.
• Credit Downgrades – Fitch, Moody’s, and S&P have warned of potential downgrades for economies failing to implement fiscal discipline.

Failures of Major Economic Policies (2015-2025)

Many of today’s economic problems stem from failed policies of the past decade. Instead of solving financial instability, excessive money printing, weak fiscal policies, and over-reliance on globalization have created economic disasters.

1. United States: The Illusion of Endless Debt Spending

• The U.S. government engaged in massive quantitative easing (QE) from 2008 to 2023, flooding markets with cheap money.
• COVID-19 stimulus packages in broke out in Ukraine, leading to prolonged inflation.

2020-2021 were necessary but triggered inflation that spiraled out of control.

• Rising interest rates (2022-2025) aimed to curb inflation but made debt repayments unbearable, further straining government finances.

2. European Union: Austerity and Weak Growth

• EU countries pursued aggressive austerity measures post-2008, limiting public investments.
• Germany, France, and Italy have seen slowing GDP growth while debt levels remain high.
• The Eurozone’s overreliance on Russian energy made it vulnerable when war3. Japan: The Never-Ending Debt Crisis
• Japan’s “Abenomics” policy (2012-2020) relied on aggressive government spending and monetary easing, pushing debt beyond 270% of GDP.
• Aging population and stagnant wages have weakened economic recovery efforts.
• Rising global borrowing costs (2023-2025) have further stressed Japan’s finances.

4. China: Real Estate Collapse and the Growth Slowdown

• China’s growth was built on a property bubble. Major developers like Evergrande collapsed, causing a financial crisis.
• Zero-COVID policies (2020-2023) weakened domestic demand, while Western trade restrictions hit exports.
• High debt levels and local government bailouts have forced China to rethink its economic strategy.

5. Developing Nations: High Hopes, Disappointing Outcomes

• Many developing countries borrowed heavily in the last decade, expecting high returns on investments.
• Rising global interest rates have made it harder for them to repay debts.
• Capital flight has worsened their economies, forcing painful austerity measures.

Economic Uncertainty and Global Instability

With economic policies failing and debt spiraling, global financial systems are at risk.

1. The Struggles of Developed Nations

United States: Soaring debt and deficits are raising concerns about a potential financial crisis.

• Eurozone: Struggling with low productivity, high unemployment, and energy price instability.
• Japan: Over-reliance on debt-fueled growth has made economic recovery nearly impossible.

2. The Crisis in Developing Nations

• India, Brazil, and South Africa are facing moderate debt levels but struggle with inflation and currency depreciation.
• China is seeing slowing economic growth, impacting global supply chains.

Economic Stress Leading to Anti-War Sentiments

1. Military Conflicts and Economic Fallout

• Russia-Ukraine War: Prolonged war has kept energy markets volatile.
• Middle East Tensions: Rising instability involving Israel, Iran, and the Gulf nations threatens global oil supply.
• China-Taiwan Conflict Risks: Geopolitical tensions could severely disrupt trade and financial markets.

2. War Fatigue and Public Opposition

• Growing Anti-War Sentiments:

Economic hardships are leading people to reject military conflicts.

• Government Pressures: Many leaders face political backlash for supporting wars while ignoring economic distress.

• Calls for Diplomacy: Countries are shifting toward economic cooperation instead of military aggression.

De-Dollarization and the Changing Economic Order

As the financial system faces strain, many countries are reducing dependence on the U.S. dollar.

1. The Rise of BRICS and Local Currencies

BRICS nations are pushing trade in their own currencies to bypass U.S. financial dominance.

• China and Russia are strengthening the yuan and ruble in global transactions.

2. Digital Currencies as Alternatives

• Countries like China, India, and the European Union are developing Central Bank Digital Currencies (CBDCs).

3. The Growing Threat of Cybercrime in the Global Economy

An alarming challenge to the financial system is the rise of cybercrime. Nations such as China, Russia, Syria, North Korea, and Iran have been linked to state- sponsored cybercriminal activities. These entities utilize hacking groups to disrupt global banking infrastructure, siphon funds, and conduct financial espionage.

Cybercriminal networks exploit vulnerabilities in financial systems to:

• Steal sensitive data
• Execute ransomware attacks
• Manipulate financial markets

They employ advanced techniques, including dark web networks, sophisticated encryption, and artificial intelligence, targeting multinational corporations and banks.

Banking System Vulnerabilities: How Criminals Siphon Off Money

The global banking system faces significant threats from cybercriminals who infiltrate using digital platforms.

Notable methods include:

• SWIFT Network Attacks: Hackers use compromised credentials to redirect transactions.
• Cryptocurrency Laundering: Exploiting decentralized finance (DeFi) systems to move stolen funds anonymously.
• Phishing and Insider Threats: Targeting or bribing employees to gain access to sensitive information.
• State-Sponsored Cyber Warfare:

Nations like Russia and North Korea conduct cyber attacks to destabilize economies and fund illicit activities.

Without robust cybersecurity measures, the global banking system risks unprecedented collapse, potentially triggering a catastrophic economic crisis.

Future Shock Warning: The Risk of Global Collapse

If urgent financial and trade reforms are not enacted, the global economy could face an unparalleled depression. Potential consequences include:

• Hyperinflation: Rapid devaluation of currencies leading to soaring prices.

Stock Market Crashes: Sharp declines  in market values eroding wealth.

• Sovereign Debt Defaults: Countries failing to meet debt obligations, leading to financial contagion.
• Widespread Economic Instability: Both developed and emerging markets experiencing severe downturns.

Global Debt Crisis:

Failures of Major Economic Policies (2015-2025):

• United States: American consumers are facing significant price increases in essential goods and services, such as groceries, gas, and housing, and although President Donald Trump vowed to end inflation and make America affordable, his early policies appear to exacerbate the situation.

• European Union: Germany’s upcoming election has called attention to its potential for increased public spending to stimulate growth, as its economy has stagnated since 2019.
• Japan: The world has now collectively accumulated about $100 trillion in public debt, she said – it’s that higher interest rates make paying it off far more expensive.
• China: China’s Real Economic Crisis.

Why Beijing Won’t Give Up on a Failing Model.

Economic Uncertainty and Global Instability:

• The latest inflation report presents a significant challenge for President Trump, showing a 3% annual increase in the inflation rate since the November election.
• Germany is on the brink of a snap general election on 23 February, following the collapse of the coalition between the Social Democrats (SDP), Free Democratic Party (FDP), and accumulated about $100 trillion in public debt, she said – it’s that higher interest rates make paying it off far more expensive.
• China: China’s Real Economic Crisis.

Economic Stress Leading to Anti-War Sentiments:

President Donald Trump’s decision to freeze USAID funding pending a 90-day review has sparked concerns about the potential repercussions on the world’s poorest countries.

De-Dollarization and the Changing Economic Order:

The podcast episode “Making sense of Trump’s tariffs. With Dani Rodrik” discussed Trump’s recent imposition of significant tariffs on US trading partners and his efforts to dismantle Joe Biden’s industrial policies.

The Road Ahead: Avoiding accumulated about $100 trillion in public debt, she said – it’s that higher interest rates make paying it off far more expensive.

• China: China’s Real Economic Crisis.

Why Beijing Won’t Give Up on a Failing Model.

Economic Uncertainty and Global Instability:

• The latest inflation report presents a significant challenge for President Trump, showing a 3% annual increase in the inflation rate since the November election.
• Germany is on the brink of a snap general election on 23 February, following the collapse of the coalition between the Social Democrats (SDP), Free Democratic Party (FDP), and

Economic Collapse and War

The world must act fast to prevent financial collapse and military escalations.

For Developed Nations:

Debt Reduction Strategies – Control government spending and reform tax policies.

✓ Reduce Military Spending – Shift budgets to economic development rather than defense.

✓ Better Global Coordination – Fairer trade agreements and investment in sustainable industries.

For Developing Nations:

Diversify Trade Partnerships – Strengthen regional trade to reduce reliance on Western economies.

✓ Reduce Dollar Dependence – Expand currency swap agreements and use gold reserves for stability.

✓ Boost Domestic Demand – Encourage local manufacturing and consumption.

Conclusion: Economic Survival Over Military Aggression

The real global threat is not war, but financial collapse. Economic policies of the last decade have failed to create sustainable growth, leaving nations burdened with debt, inflation, and social unrest.

As conflicts rage, global economies demand peace, financial discipline, and cooperation. Nations must realize that economic warfare is as destructive as military warfare, and investing in economic stability is the only way forward.

References and Sources

1. UNCTAD Report on Global Debt Crisis: https://unctad.org/publication/world-of- debt
2. International Monetary Fund (IMF) Reports: https://www.imf.org/en/ Publications
3. U.S. Federal Reserve Economic Data: https://fred.stlouisfed.org/
4. BRICS Economic Strategy Overview: https://brics-russia2020.ru/
5. Global Financial Stability Reports: https://www.weforum.org/stories/public- debt-problem-davos-global
6. China’s Economic Crisis Analysis: https://www.foreignaffairs.com/china/ chinas-real-economic-crisis
7. Impact of De-Dollarization on Global Trade: https://www.ft.com/content/global- trade-de-dollarization

(Author is a scion of legal acumen from India, third generation advocate, commenced his professional odyssey in 1981 as a lawyer.)