Global Debt

The website Visual Capitalist has a chart that shows how much of the world’s debt is owned by individual countries. The image is a giant circle. What immediately strikes one when looking at it is that half of the worlds debt is held by only two nations, the United States (31.8%) and Japan (18.8%). Some nations on the list are surprising. Is it really possible that Italy’s debt (3.9%) is roughly twice that of Spain’s?

The debts are color-coded, so that the nations with the highest debt to GDP ratios are in yellow. With this approach Japan is the clear standout, a giant block of yellow on a mostly mauve chart, with the lone exception of Greece. According to this chart, Japan’s debt to GDP ratio is currently 239.3%, the highest of any major nation. On the opposite end of the spectrum, Russia is only responsible for .3% of the world’s debt, which places it in a similar category as oil powers such as Saudi Arabia, the UAE and Nigeria. One often hears that Russia is suffering because of low oil prices. It’s also important to have the context that Russia has the lowest debt of any major power. Of course, with $20 trillion dollars in debt, the U.S. is by far the largest global debtor.

It’s also interesting to look at another chart on the same website, which shows who owns U.S. debts, and which countries owe the United States.  How is it the countries in the number three and four place as debt holders can be Ireland and the Cayman Islands, respectively? There is some unusual financial architecture behind these figures. Finally -and not to be viewed if you’re feeling a little down- there is a graphic title Visualize the Size of the U.S. Debt. The site argues that the all of the following are only enough to pay “65% of the debt: All of the world’s physical currency; all of the world’s physical gold; all of the world’s above ground silver; all of the world’s cryptocurrency.” By the time you’ve finished comparing the U.S. National Debt to the total value of the SP 500 (spoiler alert: the debt is greater) one begins to questions Keynesian economics. After all, the interest on that debt represents an opportunity cost, with funds that could have been directed to other key needs long into the future. And it’s also a huge gamble. Debts remain bearable as long as interest rates remain low. If -heaven forbid- developed economies transition from an era of low interest rates to those familiar in the 1980s, how would they ever manage their debts? There was a reason that Scottish historian Thomas Carlyle called economics the dismal science.

Shawn Smallman, 2017

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