Ratio of external debt to GDP of countries. How the debts of Japan and the United States bring them super profits
The national debt of the countries of the world is the dominant factor in destabilizing not only the financial situation in the world, but also the economic one. The only way out of the situation is to find ways to reduce global debt, including reducing its growth rate. According to world analysts, while the first world crisis arose as a result of the active growth of debts of the financial sector, corporate economy and households, the crisis of the 21st century will be caused precisely by the growth of government debts of most countries of the world. Financial market experts say with concern that countries' debt obligations have every chance of turning into simple paper by 2015.
What do the 2014 statistics say?
The national debt of the countries of the world as of the end of 2014 has frightening volumes.
- Japan - public debt corresponds to 234% of GDP.
- Greece - 183%.
- Portugal - 148%.
- Italy - 139%.
- Belgium - 135%.
The global analytical company McKinsey also included Spain (132%) and Ireland (115%), Singapore (105%), France (104%) and the UK (92%) in the top ten countries in terms of public debt. An interesting fact is that America took 11th place in this ranking with 89% of GDP. It is also worth noting that, in accordance with official government statistics, back in 2011, the state exceeded the mark of 100% of GDP. As for 2013 statistics, the amount of debt increased to 106.6%. According to preliminary calculations, America's debt should be at 109.9% in 2014. At the moment, countries are pursuing active policies to reduce public debts. The effectiveness of the activities and the final indicators of 2015 can only be assessed in December.
Lowest public debt figures
- Norway - public debt is 34% of GDP.
- Colombia - 32%.
- China - 31%.
- Australia - 31%.
- Indonesia - 22%.
Countries that have virtually no debt and whose debt is less than 20% of GDP are Peru (19%) and Argentina (19%), Chile (15%), Russia (9%) and Saudi Arabia (3%).
The relationship between national debt and the level of development of countries around the world
The level of public debt of the countries of the world allows us to establish some connection between the amount of debt and the level of development of the state. It is worth saying that the least funds are attracted to cover states that are at the stage of active development. In countries that are considered economically developed, this occurs much more often, and they systematically get into debt. If we consider debt not as a percentage of GDP, but in monetary terms, America takes the lead in this category. Its national debt has long since exceeded the $18 trillion limit. World economic analysts talk about an increase in debt by the end of 2015 to $19 trillion. Japan ranks second in the category, with debts of $10.5 trillion. Next comes China - 5.5 trillion. These three countries account for about 58-60% of the total global debt. At the same time, Russia, which in mid-2014 had a debt corresponding to 0.1% of the world's debt, is today included in the “garbage rating” of countries for which it is almost impossible to obtain a loan on the international market.
Dynamics of the situation
The national debt of the countries of the world has a positive trend, it is systematically increasing. In the period from 2007 to 2014 alone, not only the PIGS countries that pose a danger to the EU (Portugal, Ireland, Italy, Greece and Spain), but also the leaders of the international market, in particular Japan, Italy and France, managed to increase their debts several times. America has surpassed all the countries in the PIGS group. According to preliminary forecasts, the situation in the world will only get worse. Absolute and relative increases in debt are most likely to occur in countries with a high level of economic development.
Why do advanced economies have unaffordable government debt?
The reason for this phenomenon is that the pace of economic growth does not allow not only to repay, but also to service the loans taken. For the majority, economic development is characterized not only by zero, but also by negative rates of economic development. McKinsey experts, after a thorough analysis of the situation, came to the conclusion that the most difficult countries to refuse to receive a loan to refinance their debts will be Spain and Japan, Italy, Portugal, Great Britain and France. Experts see a solution to the problem in a comprehensive restructuring of the economy, by completely decoupling it from government debt.
Trends and Observations
- The greater the national debt in a country, the more concepts such as democracy and liberalism flourish in its politics.
- Developed countries spend funds from the budget without focusing on the actual state of the economy. To put it in simple language, “they live beyond their means.” The more developed a country is considered to be, the more foreign debt it has.
- The country's economic development is fully consistent with the growth of debt. The processes proceed in parallel and are almost identical.
Strange statistics, or what the external public debt of the countries of the world shows
The above observations from Der Spiegel specialists are confirmed by the actual situation in the world. Consider large international alliances. Thus, the G7, in theory, united the economies of the most powerful countries in the world. If you compare the GDP and public debt of the countries of the world from this alliance, you can see the following indicators:
- Great Britain - the amount of debt corresponds to 92% of GDP.
- Germany - 72%.
- Canada - 86%.
- Italy - 139%.
- USA - 109.9%
- France - 98%.
- Japan - 234%.
Having compared these indicators with the indicators of the BRICS countries, experts draw certain conclusions. Thus, Russia (9% of GDP), Brazil (65% of GDP), China (31% of GDP) and South Africa (50% of GDP) look more “economically healthy” compared to world leaders. Here it is worth saying that at least 0.5 billion people live on the territory of the G7 countries, who consume many times more goods and services than about 3 billion people in the BRICS countries.
What does the analysis of the 2015 situation say?
It is problematic to assess the public debt of the world's countries in real time, since official data will be presented only by the end of 2015. According to preliminary estimates, taking into account the fact that the growth of debts due to the economic situation in the world continues at an active pace, about 6.3% more funds will be spent on servicing them this year. Representatives of the Bloomberg agency report that the strongest countries in the world are actively refinancing their debts by obtaining new loans from the IMF. From official sources it became known that by the end of 2015, the BRICS countries and the G7 states must repay debt obligations in the amount of $6.96 trillion. You can hear opinions from experts that 2015 will be favorable and the amount of debt will become smaller, which at this stage seems to be an unrealistic forecast.
We should not forget one of the main Asian centers - Japan, whose economy has been experiencing serious problems for several years now. The main one is the level of public debt, which currently exceeds 220% of GDP ($11 trillion). According to this indicator, the Japanese firmly hold second place in the world - exactly after Zimbabwe, where the national debt exceeds 300%.
Every year it becomes more and more difficult for the “Land of the Rising Sun” to refinance its debts - internal resources are no longer enough, and the country is increasingly turning to foreign markets for borrowing. At the same time, as in other developed countries, economic growth rates in Japan are extremely low and highly unstable.
The country's financial situation further deteriorated in the spring of this year - the devastating earthquake of March 11 and the subsequent tsunami not only undermined the already weak GDP growth, but also caused enormous damage to the country's economy. The government intends to find $160 billion for its restoration, again, through new borrowing - which means that the national debt will grow even more significantly. At the same time, the country’s authorities and experts do not yet see any real ways to reduce it.
“Japan’s level of government debt is the largest and its servicing is already prohibitively expensive for the country. Recent tragic events in the country have forced the government to take additional stimulus measures, which does not improve the overall situation in the country’s economy in the long term,” states BCS analyst Maxim Lobada.
Given the Japanese government's difficulties in selling its debt securities (investors are increasingly reluctant to invest in the bonds of a country with a record debt-to-GDP ratio), rating downgrades and the ever-increasing cost of debt servicing, the likelihood of default of one of the world's largest economies is increasing, although it remains elusive (the country has large reserves, and can always devalue the yen). A much greater danger is the possible rise in government bond yields, which could make the debt burden unbearable. Another problem is the country’s aging population - every year the state needs more and more funds for pensions and social benefits.
However, it is already clear that the country can no longer repay such debts, and it is unlikely to be able to extricate itself from the current debt situation alone. The country is still being held back from the implementation of gloomy scenarios by the mentality of its residents - unlike Americans, they do not live on credit, but save, and household savings are estimated at $9 trillion, which is a kind of buffer on the path to default. Another supporting factor is the internal nature of public debt, distributed among populations and corporations.
The US government, or national, debt is the amount that America owes to its creditors. The US has the world's largest national debt.
National debt of individual countries of the world
General information about the US national debt
At the moment, the national debt of the United States has exceeded the mark of 22 trillion dollars. The amount is huge and psychologically difficult for ordinary Americans to comprehend, especially since it is constantly and rapidly growing. The US Treasury Department monitors changes in the national debt. The US national debt has the following structure:
- 27% – intragovernmental debt to various state companies (pension fund, for example);
- 33% – public debt to various individuals and banks;
- 40% – debt to foreign creditors.
US government borrowing ratio table (data as of August 2019)
| A country | State loan, billion$ | State loan, % |
| China | 1110 | 16,8 |
| Japan | 1100 | 16,7 |
| Great Britain | 640 | 9,7 |
| Brazil | 306 | 4,6 |
| Ireland | 271 | 4,1 |
| Switzerland | 231 | 3,5 |
| Luxembourg | 230 | 3,5 |
| Cayman islands | 216 | 3,3 |
| Hong Kong | 206 | 3,1 |
| Belgium | 191 | 2,9 |
| Saudi Arabia | 177 | 2,7 |
| Taiwan | 171 | 2,6 |
| India | 155 | 2,4 |
| Singapore | 140 | 2,1 |
| France | 125 | 1,9 |
| South Korea | 115 | 1,8 |
| Other countries | 1206 | 18,3 |
| Total debt to foreign countries | 6590 | 100 |
China and Japan are the largest holders of US government bonds totaling $2 trillion 210 billion. The average yield on all securities they own is 2.6% per annum. Russia has reduced the number of American securities in its assets, and today it has invested only $14 billion in the US economy.
The United States backs its national debt with securities issued by the Treasury. Anyone can purchase them at one of three hundred annual auctions. Bonds, although the least profitable, are the most reliable securities, because supported by property and assets of the state.
US Treasury Securities:
- Bills of exchange are the most unpopular because... Their validity period is less than a year, and therefore the interest rate on them is the lowest.
- Medium-term bonds for a period of one to 10 years with an interest rate of 0.3 to 2.6% per annum.
- Long-term bonds are valid from 10 to 30 years and have a yield of 3.2% per annum.
- Treasury securities at 3.2% per annum and for a period of 30 years are the most reliable, because for them the state additionally pays amounts that compensate for inflation.
US national debt and other economic indicators
However, it is incorrect to consider only government debt figures without reference to other indicators. If we compare debt to gross domestic product, it is 110% of total GDP, which is actually not the largest figure. For example, Japan's national debt is more than 200% of GDP, and its economy is one of the five strongest in the world.
Ratio of public debt to GDP of individual countries in %
| wdt_ID | A country | Public debt to GDP, % |
|---|---|---|
| 1 | Japan | 235 |
| 2 | Greece | 191 |
| 3 | Sudan | 176 |
| 4 | Venezuela | 162 |
| 5 | Lebanon | 161 |
| 6 | Italy | 128 |
| 7 | Barbados | 127 |
| 8 | Portugal | 117 |
| 9 | USA | 110 |
| 10 | Singapore | 109 |
Speaking about public debt, it is indicative to recalculate the state’s external debt to the country’s population. Every US citizen owes more than $67,470 thousand. For comparison: for Africans it is only 60–100 dollars per person, and in Switzerland 27 thousand in American currency.
Change in US national debt in 20th
The national debt of the American state did not arise yesterday. The US has been running budget deficits since the 1960s. and are forced to borrow funds from private lenders and foreign governments.
Table of changes in US national debt
| Year | Public debt, billion $ | Year | Public debt, billion $ |
| 1910 | 2 | 1990 | 3206 |
| 1920 | 26 | 2000 | 5628 |
| 1930 | 16 | 2010 | 13528 |
| 1940 | 50 | 2015 | 18627 |
| 1950 | 256 | 2016 | 19949 |
| 1960 | 290 | 2017 | 20164 |
| 1970 | 380 | 2018 | 21408 |
| 1980 | 909 | 2019 | 22571 |
The percentage of America's public debt to its GDP peaked in 1946 at 121%. This situation was a consequence of the huge military expenditures of the state during the Second World War. Further dynamic development of the country's economy made it possible to reduce this figure to 36% by the beginning of the 1980s. However, then the growth of public debt was already much faster than economic growth. Huge investments into the military-industrial complex and participation in several armed conflicts (Iraq, Syria, Yemen) played a big role here. Therefore, by 2012, the volume of public debt again exceeded 100% of GDP. Today this figure is 110%.
In 2016 then US presidential candidate Donald Trump promised to reduce the size of the national debt within 8 years. However, during his tenure in power, the country's national debt increased by 10%
Experts say that the US national debt will continue to grow steadily in the future. But in America there is a law according to which the country's government loans are limited by the so-called national debt ceiling. Today, the United States can borrow for any amount until September 2019, the national debt indicator on this day will be considered the ceiling. The problem, most likely, will be solved by the United States authorities in the traditional way - by raising the ceiling of its national debt.
Why is America being credited?
There is a combination of factors at work here.
- The United States has been the most economically developed power in the world for over a century. The whole world consumes products produced in this country. Oil refining, biochemistry, pharmaceuticals, mechanical and aircraft manufacturing, energy, high technology, entertainment and services are actively developing, and with them GDP is growing by an average of 3% per year.
- The United States is the homeland of many world-famous companies, whose capitalization more than covers the country's national debt. For example, the total capitalization of only six American companies Facebook, Alphabet, Microsoft, Amazon, Apple And Berkshire Hathaway is $3,400 billion, which is equal to the US debt to Japan and China. And these are only 6 out of 30 enterprises whose capitalization exceeds $100 billion.
The capitalization of only 6 American companies covers the total US debt to Japan and China.
- The USA is one of the most visited countries by tourists. About 70 million people a year come here to see New York, Washington, Las Vegas and Disneyland.
- Loan rates in the USA are among the lowest, and the inflation rate is only 2%, which makes this country very attractive for everyone who wants to start a business abroad. Every year the population of the American States increases by 1.2 million people, and it should be noted that not only residents come here South America. A huge number of entrepreneurs move to the States in order to invest in the economy of their new country of residence.
- People come to America and get an education that is one of the best and highly rated in all countries of the world. And foreigners are willing to pay a lot of money for this education.
- Recently, the United States has been actively returning its production from Asian countries to its homeland. Now it is more profitable to build a high-tech automatic plant, which will be serviced by only a few engineers, on your own territory, where energy is inexpensive and tax rates are preferential, than to keep a huge staff of workers on the other side of the world, whose labor is no longer the cheapest.
- Agriculture is also quite profitable in this country. The United States occupies a leading position in the world in terms of grain exports. Supplies of semi-finished poultry products also go to many foreign countries.
- Not to mention the music and film industries, which no one can overtake.
- The US national debt is calculated in that country's currency. The dollar is the most popular currency in the world, which is most often used for monetary transactions.
It is a mistake to think that a large external debt of the state is bad. The rules for lending at the international level are no different from issuing loans to individuals. Get borrowed funds much more the easier it is countries that have a strong economy, rich mineral resources, a high standard of living and a favorable investment environment. Such borrowers are guaranteed to return the funds invested in the bonds and all interest due to the lender. The worse the situation in the country, the more wary the creditors' attitude towards it. The United States has the highest public debt indicators, however, the economy of this state is one of the most stable and strong in the world, so few doubt that the country will fulfill its obligations to creditors.
American residents themselves have ambivalent attitudes towards their government's debts. Naturally, many of them are afraid of a situation in which the need to pay off the national debt will result in increased taxes and tariffs, reductions in wages and social benefits. But there are also those who are sure that they won’t have to pay off their debts at all, because... no country in the world will go into conflict with such a strong military power.
Why does the US spend so much money?
When talking about a country's national debt, it is important to consider what its government is spending such huge amounts of money on. America's main spending items are:
- Medicine. About $1.1 trillion is spent on various programs in this area:
- medical care for citizens with certain diseases, as well as pensioners over 65 years of age;
- qualified assistance to low-income segments of the population.
- Financial support and social protection programs for pensioners and disabled people. About $1 trillion is allocated for such events.
- Defense. America spends $1.3 trillion to defend its territory and participate in various military operations abroad.
- Other significant expenses: public transport, education, international politics.
The right to print the world's reserve currency, combined with zero interest rates, allows the country to service its growing debts and buy up assets around the world...
Successful debtors
We often hear or read: “The United States has a huge national debt of $17 trillion (104% of GDP),” “in Japan, the national debt has exceeded $9 trillion (230% of GDP) and continues to grow,” and similar apocalyptic statements.
At the same time, it is much less common to come across other, also very interesting and significant statistical data:
The US net investment position* reached $7.5 trillion in the first quarter of 2016;
- Japan's net investment position in the first quarter of 2016 exceeded $3.5 trillion.
But even less often we come across the following, no less impressive indicators:
Net investment income** for the United States in 2015 was $191 billion;
- Japan's net investment income in 2015 amounted to $171 billion.
Let's figure it out. Both countries have significant, if not very large, debts. But at the same time, they invest their funds around the world in such a way that, despite such debts and their servicing, the rest of the world pays them annually almost $200 billion in net income.
And if in the case of Japan this is understandable - it is the largest net creditor of the whole world, then in the case of the USA it looks very strange - they are the largest net debtor of the whole world.
Currency rent
The opportunity to generate income for these countries is due to the fact that both the American dollar and the Japanese yen are today reserve currencies in which the main borrowings are made in the world. And those who make these debts, primarily American and Japanese companies and banks, collect a kind of investment tribute from all over the world, taking advantage of the difference in interest rates in developing countries and in their native USA and Japan.
In the case of Japan, the accumulation of foreign investment began in the 90s of the last century, when a crisis broke out in the country and rates were dropped to almost zero. The Ministry of Finance began to increase public debt (five times in 25 years), and the Bank of Japan began to pump cheap money into the economy, and in the absence of opportunities for growth within the country, Japanese business began to distribute this money around the world, buying and creating businesses.
In 2007, already in the United States, the government began to increase public debt (twice in ten years), and the Federal Reserve lowered the rate to almost zero. And despite the fact that the US maintained positive growth rates, they still fell by more than half compared to the pre-crisis levels. Accordingly, American banks and companies, like their Japanese colleagues 20 years ago, began to buy different countries assets and ensure the flow of income from abroad.
Conclusion: Using the example of two countries - the largest debtor in the world and the largest creditor in the world, we see that extracting income from the rest of the world has become a very popular "business". The main conditions of this approach are the combination of “the right to print world currency” plus “zero” interest rates. This allows you to service your own growing debts and buy assets all over the world with “readily available” money.
At the same time, oddly enough, if a global crisis suddenly breaks out and rates go up, Japan will feel much better than the United States: it will not need to refinance its “net” debt. But America may face serious difficulties.
On the other hand, the Bank of Japan has already started buying shares for several years, and not only Japanese, but also American. Perhaps we can already say that we are witnessing the active development of a new phenomenon in the world economy, when one country (Japan) becomes not only a creditor, but also a “shareholder” of another country (the United States). This further “chains” two key world powers.
For those who are not in the club
Russia as of 2015 has a net position of about $0.5 trillion, and net investment income as of the same date is $37 billion. The public debt is very small.
China has a net investment position of about $3.3 trillion as of 2015, and net investment income as of the same date is $60 billion.
The problem is not so much that Russia and China invest their funds ineffectively, but that they are playing “on someone else’s field” - both the dollar and the yen are used in the world as the main funding currencies. China was able to achieve the inclusion of the yuan in the list of reserve currencies, which will come into effect in October 2016. Russia is also actively promoting the use national currencies in bilateral trade in the BRICS countries and the Shanghai Agreement.
The situation with the use of traditional currencies (dollar, euro, pound and yen) as reserve currencies may change significantly due to the expansion of the “epidemic” of negative interest rates. Today, more than $11 trillion worth of bonds around the world are yielding below zero. Perhaps the holders of the largest reserves - China, Russia, Norway, Saudi Arabia - will begin to actively revise their investment strategies, leaving debt for other assets. The question remains open: into which stocks, gold?.. And how will the IMF look at this?
* The net investment position (simplified) is what the rest of the world owes the country, minus what the country owes the rest of the world.
** Net investment income (simplified) is what the rest of the world pays to the country as income, minus what the country pays to the rest of the world as income.
Below is the ratio of public debt of each country to GDP
Top 15 countries with the largest external debt. Photo: penge.dk
Since 1979, the World Economic Forum (WEF) has annually ranked countries based on 12 competitiveness indicators. One indicator is the level of public debt, which shows how well a country can cope with debt without significant harm to the financial system. The lower the public debt to GDP ratio, the better.
Below are the 15 countries in the world with the largest external debt.
15. France
Public debt: 96.8%.
Due to low productivity and low wages, France's public debt relative to GDP has risen significantly this year.
14. Singapore
Public debt: 98.2%.
Despite the fact that Singapore is one of the richest countries in the world, its public debt in relation to GDP is 98.2%. And this despite the fact that the figure was reduced from 103.8% last year.
13. Spain
Public debt: 99%.
Spain has been struggling to fight unemployment, increase productivity and boost economic growth for several years now after the country received billions of dollars in loans from the EU to support the economy.
12. Barbados
Public debt: 103%.
Barbados is the richest and most developed country in the eastern Caribbean. It is also a tax shelter. However, the country still cannot recover from the credit crisis 8 years ago, and its residents are forced to live in conditions of austerity.
11. USA
Public debt: 105.8%.
The United States is on the eve of the presidential elections, which will take place on November 8, where Americans will choose a new head of state, who will be either Hillary Clinton from the Democratic Party or Donald Trump, the Republican candidate. It is also worth noting that the country expects the Fed to increase the interest rate at the end of 2016.
10. Belgium
Public debt: 106.3%.
Despite the status of the capital of the European Union, which the capital of Belgium, Brussels, has, the country has a fairly high public debt, and there are also difficulties with labor and tax legislation, the WEF notes.
9. Cyprus
Public debt: 108.7%.
Despite the fact that Cyprus has managed to reduce its public debt in relation to GDP from last year's value of 112%, the country is still in the process of recovering from the banking crisis.
8. Butane
Public debt: 115.7%.
Small asian country Bhutan is heavily dependent on India for financial assistance and expertise in infrastructure construction.
7. Cape Verde
Public debt: 119.3%.
About 82% of food in Cape Verde is imported, making the country's economy dependent on market fluctuations.
Public debt: 124.3%.
The services sector contributes about 80% of Jamaica's GDP. Among the most serious problems in the country are high levels of crime, corruption and unemployment.
5. Portugal
Public debt: 128.8%.
The country has already received billions of credit tranches several times to support the economy.
4. Italy
Public debt: 132.6%.
Italy's public debt relative to GDP is the second largest in the eurozone. In addition, Italians will soon decide in a referendum whether to accept the package of reforms proposed by the Prime Minister.
3. Lebanon
Public debt: 139.1%.
The war in Syria has had an extremely negative impact on the country. Added to this were internal political contradictions. The combination of these negative factors had a negative impact on Lebanon as a tourist destination and, as a result, on the country’s economy as a whole.
2. Greece
Public debt: 178.4%.
Greece continues to be allocated more and more new aid packages, and the country's government continues to push the population into increasingly strict austerity frameworks. However, international loans do not have a positive effect on the country's economy.
1. Japan
Public debt: 248.1%.
The country's economy is growing so slowly that the Central Bank recently introduced negative interest rates.
Ukraine's public debt in relation to GDP has already reached 80%. Experts predict an increase of up to 90%.