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A Look at the Debt Era

13 Aug 2018 - Archive

When economists evaluate the first 50 years of the 21st Century (14 of which are alreadyover), the period could very well become known as the debt era. The discussion would undoubtedly focus on debt and the struggles to deal with it.

 

Below is a map of the debt to GDP ratio by country.

 

Unsurprisingly, massive debt loads are heavily concentrated among western European countries.

 

The European countries are joined by the Japanese, Americans, China, Indonesia, Australia, and a few others when it comes to massive debt loads. (Zoomed views of the debt picture follow at the end of this write-up.)

 

A Table View

 

The following table has a bar chart view of the debt to GDP picture.

 

Fascinatingly, although generally sad when viewed in the perspective that the debt is future forgone consumption, there are, at last count, 23 countries with debt to GDP ratios above 200%. That's 200% above everything the citizens in those given countries can produce in a given year.

 

The country with the largest debt burden is Japan at 400%, followed by Ireland at 390%, Singapore at 382%, Portugal at 358%, and Belgium at 327%

 

How has debt changed since the onset of the global financial crisis in 2007?

 

Some have wondered how debt has changed since the global financial crisis took hold on governments' and households' balance sheets. Here is a look at changes in debt from 2007 to 2014 (Q2).

 

The left column is total debt to GDP.

 

The second column from the left is total debt growth since 2007.

 

The third column from the left is corporate debt growth since 2007.

 

The fourth column from the left is household debt growth since 2007.

 

The last column on the right is financial sector debt change since 2007.

 

Government debt expansion is by far much larger than corporate debt or household growth in almost every country.

 

 

Conclusion 

 

Overall, debt continues to expand at massive rates across the globe. The question every investor and interested individual should be asking is - How is debt going to be dealt with? The gross uncertainty surrounding this important question should leave many wondering how stable Europe's political situation in the future could possibly be. European countries are, of course, not alone. The Americans, Japanese, and others certainly have a good deal of debt problems on their hands. As mentioned in the introduction, debt politics could swallow attention for the foreseeable future. 

 

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