Nations In Debt: It’s Bad and Getting Worse
Sometimes when we think about debt we think directly of some small country in Africa with public debt over 100% GDP, but we shouldn’t be so hasty to look elsewhere. Debt is a problem that rings true very, very close to home.
We are going to list a few of the world’s top debtors in terms of both their public debt and consumer debt. The figures are equally as surprising as they are horrifying.
1. USA
In the USA the word debt is as common as love, we start accumulating debt as soon as we hit college when we have to start taking out loans and borrowing on credit cards to cover a huge part of costs. National debt in the USA has soared to unprecedented heights, currently approaching $9 trillion, driven largely by the housing bubble with house prices rising on average 7.7% during Q4 2006. Last year the average American spent more than he earned, again, representing the lowest personal savings rate since the Great Depression. Figures now suggest that the average US consumer has accumulated $7,850 in personal debts.
Add to this the fact that the USA has the largest credit card debt in the world as well as ever-increasing medical bills and it isn’t hard to see why more people are filing for bankruptcy. Many financial analysts are extremely worried since the USA is buying more from abroad than it exports, further compounding the problem of national debt.
2. Japan
The second largest economy, Japan, trails the United States with approximately $8 trillion owed in national debt, a figure that tests the world’s financial systems. The Japanese economy went through its own housing bubble in the early 1990’s, closely followed by an economic meltdown of immense proportions. Figures reveal that Japan’s national debt has been increasing rapidly since 1993 to more than 170% of GDP, which is on occasion the world’s largest national debt depending on exchange rate. Japan adds over $700 billion annually to the total of over US$8 trillion in national debt with most of it financed domestically. Even so, the Japanese government is severely crippled with the burden of national debt.
Japan faces tough competition from the rising eastern economies of China and India. In order to stimulate growth in their own economy Japan have lowered their interest rate in attempt to encourage consumer spending and kick-start the economy. However, figures just released show a slowdown in consumer spending and an up-tick in the numbers of unemployed, which combined with a burgeoning aging population is a source of concern going forward.
3. Germany
Germans have been adjusting to the Euro these last few years with both positive and negative implications with their move away from the Deutschmark. German public debt, running at 66.8% of GDP or approximately €1.5 trillion / $1.94 trillion, is largely attributed to an increase in property prices and increased borrowing on credit cards. Right now interest rates are climbing and there is expectation of a significant slowdown in spending through 2007 following the increase in value-added tax, which is expected to force many Germans to balance their checkbooks and get back into the black.
The German economy has been largely stagnant in recent years as the nation’s industries, VW, BMW et al, continue to move manufacturing to other cheaper countries. This combined with a reluctance to change working hours has radically reduced German manufacturing output. Hopes of a revival in the German economy are pinned on exporting German product to the booming eastern economies of China and India.
4. UK
In terms of consumer spending the British are far ahead of other European economies with a massive level of national debt accumulated largely on the back of a booming property market and high levels of consumer unsecured spending. The amount of consumer debt passed £1 trillion / ~$1.94 trillion in 2004 and hasn’t stopped since.
As a percentage of GDP Britain’s overall debt is larger than that in the United States. Figures released in 2005 suggested that average consumer debt in the UK was running at £3,500 / ~$6,800 per person or £13,153 / ~$25,500 on average per household, a figure that doesn’t bode well when compared to other European economies such as France and Italy where average consumer debt is considerably lower. However, the average UK consumer is only slightly less in debt than his average American counterpart who is debts averaged £4,000 / ~$7,850 per person.
The number of Britons declaring insolvency has risen to it’s highest levels ever in 2006 and all the signs are pointing to an increase if debt is not tackled, which is why the base rate of interest was recently bumped up to 5.25%. Many financial commentators see an increase in interest as the only way to shock consumers into paying back their debts and reducing the UK’s sizable burden on debt.
5. France
Recently released figures show a drop in French consumer confidence as growth in the economy continues to grow slowly, leaving France somewhat out of step with the rest of Europe. Spending from 2002 through 2005 has been robust in France due to small but steady rises in house prices. Household personal finances have not deteriorated to the extent of those in the UK, but pressure within France is increasing to introduce measures to combat the trend of rising consumer debt which currently is estimated at approximately €1.2 trillion / ~$1.56 trillion or €19,000 / ~$24,750 per person.
The general consensus is that consumer confidence has decreased over the past few months because of a new budgetary consciousness in consumers to decrease the amount of spending and the accumulation of debt coupled with a renewed focus on repaying outstanding loans.
6. Australia
Overall the Australian property market has been patchy in general with prices in Sydney flat lining, whereas prices in Perth have been booming. The Australian government brought in 3 hikes in the interest rate during 2006, but many financial analysts expect interest rates to fall back during 2007 in anticipation of elections. However, after three increases on the base interest rate this year many consumers are facing larger mortgages and an increasing burden on their personal finances as larger repayments bite.
Australian credit card debt is also an issue and while one would think consumer spending would diminish, it doesn’t look like the Australian love affair with plastic is due to cease any time soon. Recent reports indicate that Australian consumers have racked up AUS$36 billion / ~$30 billion in credit card debt, a similar pattern to other western economies where consumerism is rampant.
7. Canada
The total Canadian federal debt is somewhere in the region of CAN$800 billion / ~$680 billion, and when it comes to consumer borrowing the situation in Canada isn’t great either. The average Canadian household income is CAN$55,000 / ~$46,750 but the average household debt in Canada is now approximately CAN$71,000 / ~$60,400, significantly up on average household debts in 1990.
Canadian consumers are in general more motivated than ever to pay down debt, a target that is almost 3 times more important than any other goal. This attitude has been reflected in the Advance Canada plan that will see the Canadian government repaying the national debt, which will reduce interest payments and free up revenue that can be returned to citizens in the form of tax cuts. However, there is some considerable debate within Canada as to whether the government’s plan to repay their debts is fiscally prudent.
8. China
Consumer spending in China is increasing year by year, but it hasn’t yet reached the level that the Chinese administration is aiming for. With the average Chinese wage being 20 times less than those in developed nations, most consumers in China spend the majority of their income on meeting basic daily needs such as food, transport and accommodation.
However, analysts believe the average Chinese wage will rise over time and propel China into the upper echelons of the national consumer spending league, even surpassing the USA to become the biggest consumer spending nation in the world.
Chinese economic analysts believe it will take at least a decade before we start hearing about consumer debt. This rise in Chinese consumer debt is expected to be most profound in the main Chinese cities where house prices are booming. China’s reformed economic policy is tightly controlled by the Communist Party, who may use their grip on the situation before it gets out of hand and makes the Chinese economy less competitive with the much smaller but more nimble economies of Vietnam et al.
9. India
In the early 1990s India started the process of reformation with regards it’s economy. As a nation, India encouraged global consumer brands to invest in the country by setting up factories, call centers, research laboratories etc. to provide the basis of employment for a 300 million strong middle class market, comparable to that of the USA. Most of the economic growth is due to knowledge-based industries such as software engineering and financial services who have been successful in outsourcing work to India, which reduces their labor costs and increases profit margins.
This newly affluent middle class also have needs and desires in common with their counterparts in the developed world that are now becoming increasinlgy evident. As the average Indian salary, currently between $2,000 - $4,000 pa, grows over time, analysts expect consumer spending to increase in line. With the introduction of the credit card, a revolution for India, the Indian middle class has become more accustomed to acquiring debt on the back of increased spending on aspirational goods and services.
Consumer debt in India is currently growing fast with most debt accrued on credit cards and increased mortgages and loans. While the amount of consumer debt pales in comparison to that of developed countries such as the USA, Japan and UK, India’s massive middle class is not scared of spending, banking on future salary increases and economic growth to see them through.
10. Italy
Italy has one of the biggest and most affluent economies in the world driven by economic reforms introduced post World War II. Reducing the Italian national debt, currently running at 107.8% of GDP, has been one of the government’s top priorities but due to slow economic growth the national debt has been creeping up. This rise in national debt was been cited by the Deputy Economics Minister Vincenzo Visco as a disaster in 2006 that would require “bold structural reforms by the new government”.
However, Italian consumers have a small level of personal debt when compared to countries with similar economies. Like other Europeans, Italians have seen property prices rise to levels not seen in decades, but they have been able to maintain low mortgage payments thanks to Italy’s low interest rate.
Credit card and loan debts have been kept very low. While this all seems fairly upbeat, one must remember that the level of Italian public and personal debt is largely dependent on the state of the faltering Italian economy.
February 12th, 2007 at 7:33 pm
[…] I was over at Digg this morning and ran across an article titled Nations in Debt: It’s bad and getting worse from the CreditCave blog. The article is very well researched - but I cannot agree with the conclusions. The basic argument is that the United States has huge amounts of debt - especially when compared to other countries. Well, yes - the US has some big numbers when it comes to the national debt - $9 trillion dollars. This did not surprise me . What did surprise me was the Japan has an $8 trillion dollar national debt. […]
February 12th, 2007 at 9:57 pm
What about Russia?
February 12th, 2007 at 10:05 pm
Debt by itself isn’t a very meaningful figure. Our national income of 13+ trillion offsets the debt. And about 3.5 trillion of that debt is intragovernmental debt.
The sky isn’t falling. Our tax revenues (thanks to our growing economy) are at record highs. The deficit is coming down, despite 2 wars, corporate scandal, housing slowdown, hurricanes, etc…
The main goal should be to keep the economy growing. Tax revenues will increase. The deficit will go down and possibly revert to surpluses.
February 12th, 2007 at 10:08 pm
good post, but your confusing national debt with collective personal debt. The national debt has little to do with house prices and your credit cards. Also debt as a percentage of GDP might be a better way to compare debt loads of countries.
February 12th, 2007 at 10:14 pm
[…] read more | digg story […]
February 12th, 2007 at 10:21 pm
Watch this video. Mostly it talks about the Federal Reserve and how we’ll never get out of debt without changing our banking system.
http://video.google.com/videoplay?docid=-8753934454816686947&q=money+masters&hl=en
February 12th, 2007 at 10:24 pm
[…] Nations In Debt: It’s Bad and Getting Worse […]
February 12th, 2007 at 10:29 pm
[…] it is odd to live in a world in which money is rarely seen…rather is is transfered from bank account to bank account..shifted from here to there to pay back debt…to evade taxes…every account represented by a total…a total amount of cash in the account…an amount of cash that can..theoretically be withdrawn…for paper money…but rarely is..read more | digg story […]
February 12th, 2007 at 10:39 pm
Dear All,
It seems to me that the ‘global power structure’ is invoking an economic meltdown of catastrophic proportions.
People need to wake up to four basic facts:
1. CREDIT is DEBT not CREDIT. The word CREDIT implies a PLUS, when
it is in fact a MINUS, and it’s the kind of minus that drains ones ENERGY,
energy being the only real thing we all have.
2. The reason for all of this seems to be in the nature of ‘POWER & CONTROL’ over all things, from political, social, economic and religious.
Controlled ’slaves’, even ‘happy slaves’ as in Denmark, with a 50-60% tax-rate paying for all their so-called ’social welfare’, is what the BIG BOYS and their political allies are aiming for.
This spells imminent destruction of the middle-classes as they are the least controllable element wthin ALL societies, being educated, liberal minded, and dare I say more caring about ‘issues’, and often unwilling to ‘toe-the-line’. The real questioning attitude appears to come mostly from the middle-classes, therefore destroy THAT which can’t be controlled.
3. There is no difference between National & Personal debt.
It is ALL debt stemming from this culture, based on the fraudulent idea of that CREDIT is a GOOD thing. This is fed to us from the top down, from ALL the Governements and BANKS down. They cannot function without ‘conscripting’ the rest of us into this confused and brutal system.
4. Lastly, if you do not teach your children the difference between freedom and debt, then they are stuffed as well and you WILL condemn them to an even worse economic misery.
Yours, strictly doom-and-gloom,
KJ
February 12th, 2007 at 11:58 pm
“Last year the average American spent more than he earned, again, representing the lowest personal savings rate since the Great Depression. ”
So-called negative saving is grossly misrepresentative of reality. The way this “saving rate” is calculated is by finding the difference between disposable income and consumption expenditures.
Why is this misrepresentative? Because this does NOT include your 401K or social security!
Many Americans view their 401K and social security payments as sufficient for saving, so they spend much of the rest. That’s why this figure of negative saving is ridiculous and useless.
February 13th, 2007 at 12:41 am
Here is a list of countries ranked by public debt as a percent of GDP(2005): http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
The US is 34th, Japan 4.
As other posters have mentioned it is kind of confusing trying to mix personal debt and national debt in the same article.
February 13th, 2007 at 1:07 am
As Art indicated above, saying that the US has such tremendous debt is not meaninful, considering our huge GDP. Our debt as a percentage of GDP is a “mere” 64.7%, which puts us in 34th place in a list of countries by debt in proportion to GDP.
(http://en.wikipedia.org/wiki/List_of_countries_by_public_debt)
For comparison, Japan has a debt that’s 158% of its GDP, Italy’s is 108%, Germany 67.3%, and France has 66.2%.
February 13th, 2007 at 1:16 am
cm, you stole my post!
February 13th, 2007 at 1:59 am
I think Belize owes something like a billion dollars. With a population of barely 300,000, that’s an astronomical number. That comes upto like 3,333.00 dollars that every man woman or child will have to pay off.
February 13th, 2007 at 3:34 am
Hi
I checked out
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
and I wondered who are all these countries in debt too?
Where is all that hard earned tax dollas going in interest?
When will they “pull the rug” from under the world and watch us
disappear down the sink hole?
Just wondering
February 13th, 2007 at 4:04 am
Just wanted to point out that the Canadian Federal Debt is $514 Billion CDN or $437B US.
See:
http://www40.statcan.ca/l01/cst01/govt03a.htm
The figure linked to shows total public debt, which includes all Federal, Provincial, and Municipal debt, which is around $800B and dropping.
February 13th, 2007 at 5:45 am
There are those who argue that debt is not significant because incomes are on the rise, or the GDP is growing, or a variety of other reasons. I don’t see how that obviates the simple fact that in the debt-based fiat money system prevalent in the world today (in large part thanks to the Federal Reserve Act of 1913), a financial elite gets to create money out of nothing by issuing certificates of debt to us in the form of loans, then earns interest on this money, while forcing everyone to enter into nothing less than a life of indentured servitude in order to have the paper money necessary to facilitate an exchange economy. Without the banks issuing debt certificates, THERE WOULD BE ABSOLUTELY NO MONEY! Understand this amazing and cleverly-obfuscated fact: no debt, no money, no currency of any type!
What a scam being pulled on the ignorant sheep! Cui bono? The shepherds of this outrageous practice.
That is why a gold standard is to be preferred and why the financial elite and the politicians that accord them legality in exchange for special privileges do not want a gold standard with 100% reserve banking. Only such a system, completely out of the control of politicians and bankers, can restore honesty and morality to our society. We are corrupt at the very core in an exchange economy because of this debt-based banking system, and the U.S. in particular is going the way of all empires….down!
Will the sheep wake in time? History has not furnished a very positive prognosis.
February 13th, 2007 at 8:30 am
[…] Nations In Debt: It’s Bad and Getting Worse - Credit Cave (tags: economics money politics) […]
February 13th, 2007 at 7:39 pm
[…] Americans are drawing down on their personal savings at the fastest rate since the Great Depression, Japan’s debt is so large that it pushes the world’s financial systems to the limit and consumers in the UK are racking up more debt than ever before …read more | digg story […]
February 14th, 2007 at 5:55 am
[…] Nations in debt - it’s getting worse. […]
February 14th, 2007 at 10:56 am
You can’t think of national debt and aggregated personal and corporate debt in the same terms that debt affects your individual personal finance. Everyone can’t be in debt because they all have to be in debt to someone else! Rich people don’t have money that they then loan out, people who loan money are in debt themselves.
Spreading debt around lessens risk. If you owe money for anything but have some cash in a bank account, you are supplying someone elses debt while also being in debt yourself.
Please to learn about economics. This whole article is little more than an example showing how international economic ties are supposed to work.
February 14th, 2007 at 4:57 pm
Where is the money going?
When some one is in debt, the money should be accumulated some where. Where is the money going?
February 19th, 2007 at 12:10 pm
Where is the money going? That’s simple. They are accumulated by the riches, where one percent of the population loans money to another 99 percent. That’s why rich get richer, and poor buy GM stocks, take 50 years mortgages and end up living on social security payments.
June 7th, 2007 at 12:52 am
[…] Andy Boyd presents Nations In Debt: It’s Bad and Getting Worse posted at Credit Cave. Sometimes when we think about debt we think directly of some small country in Africa with public debt over 100% GDP, but we shouldn’t be so hasty to look elsewhere. Debt is a problem that rings true very, very close to home. […]
November 28th, 2007 at 8:19 pm
Now-a-days prices are going up much faster than wages….why hasnt congress took action on this issue?
November 28th, 2007 at 8:29 pm
I think that there is a huge problem with the fiat fiscal system not only in the USA, but in most western nations. What’s worse is that when the US economy catches a cold, the world economy sneezes.
December 2nd, 2007 at 2:10 pm
This seems to be exaggerated. US Debt is still only 6% of GDP which is extremely low comparatively to other nations. Interesting how this fact was left out… Just because an article is popular doesn’t make it factual.
May 17th, 2008 at 8:23 am
Germany is a huge Creditor Nation and has much less debt per capita then America.
Germany has huge Trade Surpluses and a very large Current Account Surplus(The largest in the world over the past several years along with Japan)
It is the world’s largest Exporter and also one of the world’s bankers owning trillions of dollars worth of investments around the world.
Germany and America are at the opposite ends of the spectrum really.