The National Debt: How Do Nations Compare?

As a result of the financial crisis of 2008, many developed countries have incurred heavy debts. How big are those national debts? The absolute amounts may scare you. A more meaningful figure is the debt as a percentage of the gross domestic product (GDP). The following shows the percentages for some countries (Source: Time Magazine, 5/23/11):

Japan 204%
Greece 137%
Italy 133%
Ireland 113%
USA 99%
Portugal 99%
France 97%
Great Britain 89%
Germany 81%
Spain 78%

From the above, Japan stands out with the largest percentage figure. The absolute amount is around 11.13 trillion dollars up to 2010. Japan has the third biggest economy in the world with a population close to half the size of the US. On a per capita basis, Japan’s debt is about $87,600. Note that Japan is a top exporting country that earns a huge trade surplus every year.

Germany is another top exporting country in the same league as Japan. In addition, Germany is well known for its tight anti-inflation fiscal policy. Its debt is by no means small, amounting to 2.68 trillion dollars for the whole country, and $32,762 per capita.

The US national debt has received the most attention simply because of its sheer size, about 14.32 trillion dollars, the largest of course. On a per capital basis, the US debt stands at $46,400, which compares favorably with Japan’s, and not much worse than Germany’s.

Besides the US, the other country being put on the spotlight is China. Its national debt is estimated to be 10 trillion dollars, about $7,700 per capita. Rather than the national debt, China draws world attention to its huge trade surplus (183 billion dollars in 2010) and foreign exchange reserves (3,045 billion dollars).

Another interesting feature about the national debt is the percentage of debt being owned by foreigners. The following table illustrates:

Ireland 83%
Portugal 80%
Greece 75%
Germany 60%
France 59%
Italy 46%
Spain 39%
USA 31%
Great Britain 30%
Japan 7%

Once again Japan stands out with the smallest percentage of debt owned by foreigners. The Japanese government borrows heavily from large Japanese banks, and also from the state-run post office where Japanese citizens used to deposit their savings. A bill was passed in 2005 to transfer the post office to private hands over the next 12 years.

For those European countries listed above with a high percentage of foreign-owned debt, the creditors mainly come from the European Union (EU). That is, members of the EU help each other finance their own national debts.

Despite its relatively low percentage of foreign-owned debt, the US again draws world attention because of its two largest creditors, namely, China and Japan that buy up most of the Treasury bonds issued by the US government. Japan does not present a great controversy because of its protégé status after World War II. Japanese financing of US debt serves two purposes: to pay protection money, and to finance US consumers to buy more Japanese goods.

On the other hand, US relationship with China is totally different. They are neither friends nor enemies, but serious competitors lasting into the future. They don’t share any common value except to make money in the most capitalistic manner. They don’t particularly like each other, but they know they depend on each other in many aspects. It’s the consumers that bind both countries together. US consumers like cheap Chinese goods, which makes the Chinese government eager to finance US debt. Conversely, Chinese consumers increasingly like American products, too. Does that look like an odd relationship?

(May 2011)

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