Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
What are the Biggest Gambling Markets in the World? - 30th Mar 17
Stock Market Mixed Expectations As Technology Stocks Reach New Record Highs - 30th Mar 17
Bitcoin Price Rises Higher Than Gold… But Its Value Is a Different Story - 30th Mar 17
Critical Fibonacci Extensions May Mark End Of Trump Stock Market Rally - 29th Mar 17
Ending Syria’s Nightmare will Take Pressure From Below - 29th Mar 17
Charts That Reveal US Real Employment Status and It’s Not Good - 29th Mar 17
SNP Controlled Scottish Parliament Demands Right for Scotland to Commit Suicide - Indyref2 - 29th Mar 17
USD Gold Myriad of Signs - 28th Mar 17
Ominous Social Trends That Will Shape Our Future - 28th Mar 17
Foundation And Empire: Is Donald Trump The Mule? - 28th Mar 17
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

World Sovereign Debt Map

Interest-Rates / Global Debt Crisis Oct 01, 2010 - 03:46 AM GMT

By: Seth_Barani

Interest-Rates

Best Financial Markets Analysis ArticleDebt creates problems. It is seldom known to solve problems, especially in the long run. Countries with high debt are vulnerable to currency weakening as debt drives assets out of those countries towards low risk, high yielding countries.


Here is an easy reference to sovereign debt of countries in the world. A simple color-code has been used, where red denotes public debt per capita over $10,000, yellow denotes debt per capita between $1,000 and $10,000, and finally, green color denotes debt per capita under $1,000. The color-code may be a bit deceptive in borderline cases where the debt is close to $1,000. The data for a couple of countries are a bit old (e.g. 2008). The map should only be used to gain some idea into the big picture but not for cherrypicking potential investment destinations.

An interesting pattern emerges from the color-coding. There is some connectivity between countries with similar color! It shows that the pattern of government borrowing/spending may have some cultural underpinnings.

Red States: Most of these are ultra-capitalist nations and are economically and politically close to United States. Did these countries assume that US would lead their way in borrow-and-spend voodoo economics? Japan leads the show with nearly $78,000 per person. This is just the sovereign debt. We haven't even delved into consumer/commercial debt. On yearly basis the US per capita debt grew fastest (from $15,000 to $28,000 in a few years), but per capita debt for some other countries (e.g. Norway, $55,000) are way higher than USA.

Yellow States: The south American nations do not seem interested in drinking US binge. China is close to crossing the $1000 milestone and may turn yellow quite soon. East European nations and Russia are also somewhat fiscally sensible.

Green States: Other than India, many of them are in Africa with low GDP, low debt, but rich in resources. Unfortunately, most of the African nations are kept in perpetual conflicts by arms supplied by some Red and Yellow States.

One may argue that governments spend more because of the catalysis given by higher GDP. I would argue the reverse - higher government spending is reflected in an artificially elevated GDP. The recent 'stimulus' in US aimed at propping up the GDP is one such example. Further, the belief that higher GDP may service the sovereign debt is only half-valid. GDP must combine with low tax rates to have a better chance of surviving the debt.

Question: Which countries have low debt/GDP ratio?

We didn't include Japan in the chart because it will cast a shadow on other countries. Japan is in a terrible shape with nearly 200% debt/GDP and one wonders how long will it be before its ratings are downgraded.

From the above chart one can see that Russia has aggressively cut down the sovereign debt vs GDP ratio from almost 90% to 20%. China and Australia also have performed well to keep a low ratio. USA is not badly placed being in the middle order along with India but we haven't included the intragovernment borrowing (e.g. from Social Security Trust) for US data. If the intragovernment borrowing is included, the ratio would be close to 90% instead of the 60% shown in the graph. Across the Atlantic, UK, France and Germany are outdistancing themselves from others and knocking at the 100% mark. Some interesting countries not included in the chart are (a) Saudi Arabia that has significantly cut down its public debt, but perhaps mainly from its oil revenues (b) Belgium, which has been near the 100% mark most of the years (c) Iceland whose debt grew fast from 43% to 115%, (d) Iran whose debt decreased from 30% to 18%, (e) Italy always above the 100% mark - congrats! (f) Romania seriously working to reduce the ratio with high fiscal responsibility.

As mentioned earlier, debt servicing is easier if the tax rates are low, since there is room to increase the taxes. From that perspective, countries with high tax rates are Belgium, Germany, Denmark, France, Italy, Finland. Lower rates prevail in Australia, China, India and Russia. Japan, UK and USA also have some cushion left before they can catch up with European nations on tax rates. Thus, one can surmise that while Japan, UK and USA may resort to increasing taxes, EU nations will be forced to accept austerity. When the average American is forced to deleverage his debt, Uncle Scam will be actively monitoring his bank savings account and at the very first sign of improved personal savings his taxes will be hiked. Note: Kicking and screaming to austerity still will not result in any retirement savings for Americans!

The combination of per capita debt, debt/gdp and the tax rates show that countries like Russia, China and India have low debt per capita, low taxes and low debt/GDP ratio. Australia, while it has low debt/GDP ratio and tax rate, it has a high per capita debt. The EU-US belt is both high in per capita debt and high debt/GDP ratio and without much room left for additional taxation. We anticipate that Belgium will soon be renamed as BellyUpGium, owing to its high debt, high per capita debt, high debt/gdp ratio and very high tax rates.

    Author Seth Barani is a PhD in physics and is a freelance capital market researcher and trader. He can be reached at s.barani@gmail.com.

    © 2010 Copyright Seth Barani - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife