Sit down. It’s time we had a serious talk. I hate to tell you this. But we’re broke.

By “we,” I mean the US, Canada, Germany, Japan, and the UK. In fact, most of the developed world is holding historical levels of debt. Only a handful of relatively small countries are living within their means.

That means we’re going to have to cut back a little. That vacation you wanted? Probably not. We’re going to have to wait a few years for that new car. Maybe the kids won’t get to go to their first-choice college. No, we can’t discuss this at that new restaurant everybody’s talking about. Like I said, we’re broke.

Why? That’s easy. The world is aging.

Aging Is the Driver of Debt

The biggest budget component of the US and other developed countries’ is related to aging and related diseases. In the US, this is primarily Social Security and Medicare. Together, they make up more than half the total budget.

The two programs are more closely linked than most people realize. This is because most people don’t choose to retire. Rather, they are forced to become dependent by health problems or employer mandate. But even employer-mandated retirements are about health. Few talk about it, but older workers raise insurance pool costs. It’s cheaper to get rid of old workers than pay higher insurance rates.

It’s helpful to think about national debt in terms of households. For some reason, people don’t seem to take national budgets and debts seriously. They think that governments will be able to borrow forever to maintain popular spending programs.

But even governments run out of credit at some point. There’s no national credit card that can be cancelled. There is, however, a limit on how much governments can borrow. Greece, for example, can no longer borrow at low prices. That’s because lenders don’t trust the country to make payments on time. Eventually, the US and other major countries will reach that same point.