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tyres

What Country Has The Most Unsustainable Debt?

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Any country that borrows using another countries money, basically.

After that, who knows?

Japan's debt is insane. But its all held domestically.

Clueless how thats going to pan out.

The UK has a large debt relative to GDP.

And its running a consistent, large current account deficit, which will blow up in its face.

Again, don;t know how itll pan out. Usual routine - pound falls, inflation shoots up, pound falls again, IR raised.

I'm not 100% of why people think that Boe Can just monetise the debt. If it was that simple +legal why does the BoE not say so??

Countries debt is issued under rules - witness the hedge fund repo-ing an Argentine naval vessel in Ghana.

Imagine waht would happen if the Saudis decided to repo a UK naval vessel?

Nothings free - the cheap stuff always turns out to be the most costly.

I think one thing that'll come out of the last few years is that countries are to borrow in some sort of synthetic debt i..e x% dollar, % Euro, x% yen x% yuan.

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According to the chart below total UK debt was similar if not larger than Japanese total debt in 2011.

Picture-42.png

that includes private debts as well. Though as we all know from the bailouts, a private debt is simply a public debt that hasnt gone bad yet...

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There's a joke about campers and bears that points out that if the camp is attacked by a bear you don't have to outrun the bear, you only have to outrun the slowest camper. National debt carrying capacity is a bit like that I think- it's not really about how sustainable your debt is relative to your economy, it's about how credible your economy/political system looks compared to other economies/political systems.

After all, the rich have to park their money somewhere right? And it's a closed system, tax havens not withstanding. So if the UK looks safer than most other places it will be able to borrow more relative to it's GDP than other places. So debt sustainability is less about GDP and more about how creditors feel about the overall stability of the nation involved.

This is why property prices in London are so high these days- in part because people in China and Russia and other places trust the UK's legal and social stability more than their own nations.

Not so long ago people were actually paying the Germans for the privilege of lending the Germans their money, such was the value placed on holding German state debt at the time. It's perverse but true to say that the more unstable the global economy looks the higher the debt carrying capacity of the more 'safe' countries seems to be because it's to these places that the wealthy will flock in order to preserve their capital.

So the common sense idea that a nations ability to borrow is directly correlated to their internal economic situation in isolation is not really true- what matters is how your situation both economically and politically stacks up against other nations- it's a relative rather than an absolute metric.

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that includes private debts as well. Though as we all know from the bailouts, a private debt is simply a public debt that hasnt gone bad yet...

Indeed. It includes all debt (households, corporations, financial institutions and government) and seems to give an overall perspective rather than with government debt alone. For example debt has been mentioned as the main reason for SSI the Redcar steelworks going bankrupt and closing down.

The US is often mentioned as being in difficulty but in 2011 had (like Germany and a few others) about half the total debt (as a percentage of GDP) of the UK and Japan.

Edited by billybong

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The map, from cost information website HowMuch.net, scales each country based on the size of its debt compared to GDP (hello, Japan!) and then colours them based on their growth rate.

Growth rate is a dangerous measure. It can get faked (or at best heavily massaged) as in Blighty pre-2008. And it can suddenly turn around and bite you in the debt, as happened to Spain.

See Goodhart's Law.

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Growth rate is a dangerous measure. It can get faked (or at best heavily massaged) as in Blighty pre-2008. And it can suddenly turn around and bite you in the debt, as happened to Spain.

See Goodhart's Law.

And what is govt spending classed as ? GDP !

You cannot make it up. So the numbers are meaningless. The Tories have racked up more govt debt in 5 years than labour did in 13 and they also claim GDP is growing. Spot the trick. When this charade collapses we had better stand back.

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Japan's currency will be lower for the rest of your life.

Not in a straight line.

I doubt that, like all currencies it is manipulated but it's weak at the moment, when companies start repatriation of wealth it will go up again. Was weak, then stronger than the dollar, now weak again. My guess is it will go up before the Olympics are on.

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Debt to GDP in some senses is meaningless as it's only a measure of now. If GDP contracts this ratio alters if you have real growth it alters. It just gives you a false sense of security.

GDP is pretty meaningless too. Hedonics, and treating inflation (ie the opposite of productivity) via imputed rents as growth when its the opposite, using RPI instead of money supply minus productivity change as 'infaltion'...then randomly adding things like prostitution to boost GDP...none of it is historically comparable.

Truth be told, though there is the feminist veneer, this whole childcare debacle is about taxing and making certain things visible in GDP stats...same with the EU's desire to involve itself in housework under the narrative men must do 50%. Its all so it can be monitored and added to GDP (even though it was there since the beginning of time)

If I was PM the first thing id do is stop recording GDP and instead target real wages/purchasing power vs employment.

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