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article imageThe economy of debt: The illusion there's money to spend

By R. C. Camphausen     Mar 3, 2010 in World
With the Greek economy and its problems in the news often, this article takes a look at other countries in the Euro zone and compares their situation with that of Canada, Great Britain and the US.
In this article, Digital Journal features a custom designed graphic to illustrate the various recent reports concerning the troubles of Greece, the problems of Europe and the new currency introduced to the public in the year 2000.
If one compares the values in the chart below with a few countries of interest outside the Euro zone, there are interesting numbers to be found. When we compare non-Euro countries with what is going on in Europe, it seems to look rather good for Canada (where debt is 53% of the country's GDP) where the debt level is within what Europeans believe is sensible. However, even this policy can be criticized because it is based on a perhaps false assumption that such amazing debt can ever be remunerated in the future.
However, when all is counted in both the UK and the U.S., these entities a're very much near the level of Europe's most problematic nations. The UK, where debt is approximately 103% of the country's GDP, is even worse off than tiny Belgium - Nigel Farage's no-country - and the superpower known as the United States of America is very much down there with Greece (where debt is 125% of the country's GDP), in deep trouble, with national debt being 122% of the country's GDP.
Comparison of debt in countries with the Euro as currency
Comparison of debt in countries with the Euro as currency
Some research online shows a variety of values that differ, depending on who gives what information and whether or not all liabilities are included and counted. It's a tedious process to count everything, and without being an economist having access to a lot of data, it is rather impossible to judge who exactly is right. On the other hand, it doesn't really matter whether or not a given nation has a debt of 99 or 103 percent of GDP (Gross Domestic Product), since both these values are terrible ones.
Looking at an interesting analysis of the debt level in Canada, the U.S. and Great Britain, Canada Free Press had a feature concerning these three countries in 2009. What follows are a few quotes from that publication:
Britain’s Centre for Policy Studies argues that the real national debt in Britain is already £1,340B (C$2,370) and now stands at 103.5% of GDP.
Like Britain, the US also has unfunded liabilities for health care, pensions and its continued bailouts. Once these are added to accepted national debt, the total indebtedness of the US is 122% of GDP. Most of the official debt is held by China and Japan.
Canada, meanwhile, has a national debt of approximately C$461B – or $13,771 for every man, woman and child. This represents less than half the per capita debt burden of the US. Although Canada’s debt represents 53% of GDP it has a long way to go to get into the major debt leagues.
As one contemplates these numbers, knowing China – holding much of the US debt – still has a debt of 60% of its GDP, the only conclusion possible is that apparently every nation lives above its natural limits.
Russia, by the way, as Bloomberg reports, expects a debt of a mere 7% of GDP, which is even better than the least indebted European country; which is Luxemburg.
More about Euro-zone debt, Economy, Debt, Money, Euro
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