A good way to think about this is to make an analogy to something more concrete, something you may be able to relate to: a mortgage on a house.

If someone told you they had an $800k mortgage on their house, would that be enough information for you to form a judgement on their financial situation? No, you'd need to know a lot more. Now, let's say they also told you that their mortgage payments were $8k/month and their annual income was $360k. That would give you a much better idea of their situation.

Now suppose that they didn't tell you any of this, and instead the only thing they told you was that their monthly mortgage payments amounted to 27% of their monthly income (i.e. same situation above). Would that be sufficient to gauge their financial health?

Yes, but only if status quo is maintained. What if it turns out they had an adjustable-rate mortgage, and their monthly payments were set to rise and fall with prevailing interest rates? Suddenly, the amount of the mortgage itself ($800k in our case) matters, because you'd need to know that in order to calculate what the monthly payments will be.

In the above analogy, mortgage debt is analogous to US federal debt, and income is analogous to GDP (but really, government income aka tax receipts is some fraction of GDP).

Does it matter that our federal debt is around $32T [1] if the interest payments are less 2% of GDP [2022 data, see 2]? I would say it absolutely matters, because a huge chunk of that debt was issued when interest rates were low and will need to be refinanced (e.g. they charged a bunch of money onto a 0% interest rate credit card but as the principal payment comes due, they pay it using another credit card that is charging 4.5% interest – this will cause interest payments to increase dramatically).

You can also see that I glossed over some details that are necessary to get an in-depth view of the situation: namely, the structure and terms of the debt. How much debt was financed when, under what terms?

Hopefully this is helpful and will allow you to reason things out a bit without relying on someone else's opinion. Also, a disclaimer: I'm just a layman and have no expertise in this area. The above is just my understanding. But I believe the gist of it really is this simple – no rocket science here.

[1] https://fred.stlouisfed.org/series/GFDEBTN [2] https://fred.stlouisfed.org/series/FYOIGDA188S

At first glance I'd be inclined to agree, largely because the Debt/GDP ratio gets to the heart of a nation-state's ability to service its liabilities which matters much more to creditors than its debt load in absolute terms. I will say, though, GDP is an imperfect measure of productivity (in my opinion) and the true burden of servicing debts depends on many more factors than just an economy's run rate.

I would say that's a valid thesis.

Thanks for the zap - what do you think about sovereign debt in general? Personally I think they're shitcoins, I don't have any allocation at all to the asset class. Sovereign borrowing seems to be on a purely upward trajectory from here (in the US, but probably most of the world too) and will likely crowd out private debt in the market, suffocating businesses in the process.

Seems clear to me that the 40-year bull market in bonds is over. Sovereign CDS rates likely bear out some recognition of the increased riskiness of being a bagholder in the bond market.