World governments have borrowed massive amounts of money to live beyond their means. Above is a graphic showing the world's largest economies, how much debt they borrowed and the interest payment due relative to their GDP. The tab is piling up...
Bloomberg: World’s Biggest Economies Face $7.6 Trillion Bond Tab as Rally Seen Fading
How the debt eventually piles up?
This is just an ordinary US$ 100 bill
US$ 10,000 can fit snugly into your trouser pockets...
Hmm...US$ 1 million needs a decent sized briefcase...
At US$ 100 million, one needs to stack these notes onto a pallet....
US$ 2 billion dollars...that's 20 pallets loaded onto a truck...
Now let's visualise how major countries debts are piled up compared to the size of national landmarks...
The number of red pallets represent government repayments due in 2012;
yellow equates to the outstanding debt after the 2012 repayments; the trucks represent the 2012 interest payments due on the total debt piles
Hat-tip to Demonocracy.info
India
India is rather poor if you look at individual income but because of its large population, skewed with younger demographics in which
more than 50% are under age 25 and 65% under 35
, it is a significant economic power-house in the world.
It has racked up a debt of 74% of the economy in 2011, which is more than the 60% debt to economy ratio set by EU for economic stability standard.
China
The debt pile seems rather scary for China but the size of its economy and population is not to be underestimated. The debt only accounts for ~17.5% of the economy.
China has the world's second largest economy, overtaking Japan in 2011, it is still experiencing economic growth and has the biggest foreign exchange reserves in the world at US$ 3,200 billion.
The bigger the foreign exchange reserves, the more power the country has to influence the value of its own currency.
The greater a country's foreign reserves, the better position it is in to defend itself from speculative attacks on the domestic currency.
It is also
accumulating gold bullion aggressively in 2011
to diversify its "paper" reserves.
Japan
Japanese debt stacked around the destroyed Fukushima Nuclear Power
Plant. Japan could have built a wall of money to keep Fukushima safe
from the Tsunami, with all the money they borrowed.
Fukushima Power Plant
compared to the trucks is GIGANTIC.
Japan is a unique example. It holds a MASSIVE 228% debt to
economy ratio. This is only possible because of loyalty of Japanese
people to the Japanese government. Japan's people are the main buyers of
Japanese government debt, and as long as they blindly buy the debt, and
interest rates don't go up, they can practically run up the debt
indefinitely. The issues start when everyone starts wondering how they
will get the money back.
While historically having a good export surplus; Japan still
has two "lost decades", where it has experienced no economic growth.
This is mainly due to the large amounts of debt.
United States
USA is the nation with most debt by far in the history of human civilization.
USA's total debt, including personal debt, real estate
(mortgage) debt, consumer debt, credit card debt and government
debt totals
a mega US$ 47,992bn, roughly 2,400 trucks full of money. That's the huge wall at the back in the graphic. Source:
US Debt Clock
USA borrowed US$ 1,229 billion in 2011 - roughly 2.5x towers of cash in the background. USA runs a mega ~35%
budget deficit, far
above the 3% max limit set by EU for economic stability standard.
With industrialized world economies in crisis, USA faces
little problem to finance its budget deficit in 2012 since world's
money
is currently
flowing into USA in great numbers as investors try to find "safety" where to store their money, since Europe is not safe; neither are banks.
As long as USA has access to
cheap credit due to scared investors willing to hand over their money in name of "safety", USA's interest payments will remain far
below normal. Much depends on it retaining its AA+ credit rating and the US dollar's status as a world reserve currency.
Canada
Canada has a US$1,577 billion economy, while carrying a relatively insignificant trade deficit of US$ 9 billion.
In 2012 Canada must re-pay and/or re-finance a significant portion of its debt. It must refinance 42% of its debt, but since the country carries as AAA credit rating as of Jan. 2012 it faces little challenge to re-finance its debt.
Brazil
Brazil has in recent years become an Economic
power-house and is now included in the G7 (Group of 7)
nations meetings.
The economy is rated at US$ 2,517 billion.
With a 4.7% unemployment in 2011 and an export surplus it
it is doing rather well.
United Kingdom
The UK has a large economy of US$2,480 billion but now holds debt in the size of ~75% of economy, which is more than the 60% max debt to economy ratio set by EU for economic stability standard.
As of Jan 2012, UK holds a AAA credit rating but has a staggering Gross External Debt of US$8,981 billion(not shown).
The private sector of UK (people, business', etc) are highly indebted, only surpassed by USA. High debt slows economic growth and it is reflected in the slow 0.9% growth of economy in 2011, which is much lower than the 4.2% inflation - meaning
people of UK are becoming more poor as of 2011/2012.
France
The French are among the countries attacking PIIGS countries for their bad economic behavior, but are increasingly finding themselves in the same economic situation.
Their credit rating was downgraded from AAA to AA+ recently and hold a 83.5% (2011) debt to economy ratio, above the 60% set by EU for economic stability standard.
French banks are also among the financially weak banks that pose a danger to the French economy.
Italy
Italy's economy is considered weak and too indebted for safe financial operation. Even its key commercial banks, including Unicredit, are a total mess.
It has a debt ratio of 118.1% (2010) to economy, far above
the 60% limit set by EU for stability. Italy faces a GIANT re-payment /
re-finance of US$ 428 billion of its debt in 2012, with strong fear that
it will have problems finding lenders/investors that want to lend the
weak country money.
Credit rating agencies say the outlook for Italy is negative, which means their credit rating will be down-graded in the future, as the debt takes serious toll on the economy and try struggle to pay back their debt.
This will further scare lenders / investors away and force
the interest rates up - amount of trucks full of cash of tax-payer money
sent to investors / banks / lenders.
Germany
Germany is considered the flag-ship of European economies.
Germany holds a ~80% debt ratio to economy, above the 60% limit
standard set by EU for stability, while being mad at Greece and PIIGS
for doing the same.
Germany faces a US$ 285 billion repayment/refinance of debt in 2012
but sees no problem of finding lenders, since Germany's economy looks great compared to the rest of the industrialized world.
Russia
The motherland is doing great...
Russia compared to its large economy holds barely any government debt - only 2.5% of economy (GDP).
Russia's Government benefits from large export surplus
to pay for government's expenses.
The export surplus comes mainly from
exporting natural resources, including natural gas and oil.
