By J.D. Neeson, President, Marine Parts Express
It struck me the other day that everyone talks about government debt and how much personal debt people have, but I had never seen what the total debt is. So here is a nifty table showing some of these. All the numbers are a percentage of a country’s GDP and are estimates.
Country % GDP % Government Debt % Business/Bank Debt % Household Debt UK 497 77 340 80 Japan 492 213 226 53 Spain 366 66 210 90 France 341 88 223 30 Italy 313 110 165 38 South Korea 306 30 186 90 US 289 80 124 85 Germany 284 86 149 49 Canada 274 68 118 88
So, in the United States, the total debt is 289% of GDP and out of this number 80% of GDP is Government Debt, 124% of GDP is Business/Bank Debt and 85% of GDP is Household Debt. Or, to phrase it another way, as a percentage of total debt, which is a bit more revealing of the government and societal pressures that countries have to deal with and the decisions that are made either consciously or unconsciously.
Country % Government Debt % Business/Bank Debt % Household Debt UK 15 68 16 Japan 43 46 11 Spain 18 57 25 France 26 65 9 Italy 35 53 12 South Korea 10 61 29 US 28 43 29 Germany 30 52 17 Canada 25 43 32 Average Rate 26 54 20 Median Rate 26 53 17
There are all sorts of observations and deductions that can be made from these numbers. For example, I think what it shows is that while Japan and France have relatively low Household Debt they have higher than average Government and Business/Bank Debt. But the reasons for this are different. Japan has a history of high personal savings, but the country has been forced to keep society afloat through government support of its industries.
The French, on the other hand, have forced their industries to keep artificially high wages and benefits by government edict. That has kept Government Debt down, but has forced businesses to take up the slack. Much of the needs of the French people are supplied by either the government or by their employers, so personal debt is lower.
Another example is South Korea and the United Kingdom, both of which have relatively low Government Debt. Again, it is for different reasons. The Koreans are much more hands off when it comes to economic issues type forcing industry or households to take on the debt risk, while the U.K. form of socialism controls the economy more closely and forces industry to take on the debt.
You notice none of these broad generalizations include efficiency or value considerations and there are all sorts of other factors that create the choices that countries make. The only aspect that seems clear is that less debt is better than more debt and more capitalistic economies seem to spread debt risk over the entire economy more than the socialistic countries that either dictates the entity that will be the debtor or take the debt onto themselves.
I have no idea which is better, but this decision may affect which class of borrower has the most say in the governing of the country. In all cases, the beliefs and societal mores can tie the hands of decision makers more effectively than laws passed.
I would love to find the same sort of numbers for China, Dubai, or some other very strictly controlled economy more totalitarian form of government and compare it with the numbers for Sweden or Denmark. And wouldn’t poor Greece’s or Portugal’s numbers be fun to look at?
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December 2, 2011 / JD Neeson / 0
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Margaret Graham Neeeson
Margaret Graham Neeson
Marine Parts Express