It’s no secret that the world is addicted to debt.
China for instance, has an astounding $28 trillion debt load that amounts to 282% of GDP, while the country’s local governments are now undertaking a multi-trillion yuan refi initiative in order to cut the debt servicing costs on a mountain on high interest loans they acquired off balance sheet in an effort to skirt official borrowing limits.
In Europe, a series of fiscal crises nearly brought the currency bloc to its knees in 2012 and indeed, the drama continues today with Greece sliding ever closer to insolvency as government revenues are woefully inadequate to cover the country’s obligations.
Japan had its credit rating cut by Fitch late last month with the agency citing the “high and rising level of government debt” which Fitch projects will rise to 244% of GDP by the end of the year, “by far the highest ratio of any rated sovereign.”
Of course the US has its own debt woes, not the least of which is the well-documented $1.3 trillion student loan bubble which is, for the most part, underwritten by the American taxpayer.
The following graphic shows the evolution of the world’s debt addiction from 2000 to 2014. Note that the y-axis is debt-to-GDP while the x-axis is GDP-per-person, meaning that a line which slopes up and backwards is the worst case scenario as it generally indicates a contraction in GDP and an increase in debt burden. Each line is a country and you can find the full interactive graphic from The Economist here.
Here are some country-by-country highlights:
More color from The Economist:
The borrowings of governments, households, companies and financial firms have risen in almost every big country around the world since the year 2000, relative to their GDP. As economies develop they naturally build a bigger stock of financial assets, including debt. But plenty of countries have gone out on a limb. Some are financial centres, such as Singapore and Ireland. Their debts are inflated because they host the subsidiaries of many global banks and companies. Others have economies that are driven by debt-fueled investment, or which are stagnant. China has similar debt levels to America, despite being only 20% as rich as it per person. Portugal has similar leverage to Sweden, which is almost twice as wealthy as it. Troubled Greece’s debt-to-GDP is on a par with that of prosperous Norway’s.Countries with disproportionately high debts are more prone to crises. But working out how to shrink-debt to GDP without causing a slump is tough—as China is discovering.
