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As I write this, the Republican tax bill is being debated on its merits. Whether you agree or disagree with the tax bill, it appears that we will have a new tax code starting in 2018. Recently, analysis over the tax bill has shown that according to the Congressional Budget Office, the tax cuts will increase the US deficit by over $1 trillion over 10 years.
Some think this figure is overblown. Some say that money is cheap, so why not take advantage of the cheap money now and stock up?
Governments like to spend money in areas such as building roads, hospitals, and schools, and even on defense. These media pundits will even point out that heavy national debt is a sign of wealth. You only lend money to those who you are sure will pay you back, right?
Meanwhile, some emphasize the doom and gloom of carrying too much debt. They question what will happen to the US when it finally comes to service all of the debt. They point to how Greece has been crippled by its mounting debt. Even after Greece recovered from a peak unemployment rate of 28% in 2013, 20% of the population is still unemployed, with over 40% of those ages 15-24 out of work.
Of course, there are experts who advocate leveraging certain debts, like one’s mortgage. Why pay off the mortgage when you could invest that money into something more worthwhile? However, people don’t always succeed at investing the difference in their 401(k)s and IRAs.
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Debt is a double-edged sword.
As many of you know I’m a big fan of eradicating all debt, including paying off the mortgage. So admittedly, I have a bit of trepidation when it comes to our country taking on more debt. I’m also not convinced that politicians make wise investment decisions with our tax dollars and regarding debt.
With all that said, I was curious to see how much debt each country had and in turn, how much debt per person each country carries. I think you’ll find the statistics shocking.
For some context, we often hear pundits talk about the government debt as a percentage of the GDP to show the vulnerability of the country’s financial health. In this case, the lower the percentage, the less vulnerable a country theoretically is. In contrast, the higher the percentage is, the more risk involved.
From 1940 to 2015, the US debt had averaged at around 62%. However, as most of you know, the amount of debt the US has accrued in recent years has increased.
Source: Trading Economics
As you can see, in 2016, the US debt ran over 106% of its GDP. If that seems high, that’s because it is. However, debt-to-GDP ratios around the world have increased in recent years, as governments take advantage of historically low interest rates in order to borrow cheap amounts of money before interest eventually rise.
US Ranking in Terms of Debt
Shockingly, the U.S. does not rank first when it comes to the indebtedness of a population. In fact, it doesn’t even make the top 4. When you take the global debt and divide it by the national debt load by population, the US comes in 5th, with an average of $42,503.98 per person.
The top spot belongs to Japan, with an average of $85,694.87 owed per person, according How Much.net. That site factored in the numbers from the International Monetary Fund, the CIA World Factbook and the World Bank.
Source: How Much
Below, I compiled a list of the top 10 countries that owe the most and the least amounts of debt.
The Top 10 Countries Where People Owe the Most
- Japan: $85,694.87 per person
- Ireland: $67,147.59 per person
- Singapore: $56,112.75 per person
- Belgium: $44,202.75 per person
- United States: $42,503.98 per person
- Canada: $42,142.61 per person
- Italy: $40,461.11 per person
- Iceland: $39,731.65 per person
- Austria: $38,769.98 per person
- United Kingdom: $36,206.11 per person
Top 10 Countries Where People Owe the Least
- Liberia: $27.44 per person
- Tajikistan: $50.67 per person
- Democratic Republic of Congo: $90.70 per person
- Burundi: $97.62 per person
- Kiribati: $126.98 per person
- Malawi: $172.34 per person
- Uzbekistan: $177.13 per person
- Uganda: $194.23 per person
- Haiti: $204.33 per person
- Mali: $207.54 per person
The Snowball of Debt clearly shows that debt is highest among people living in developed countries. Meanwhile, those who owe the least tend to live in more developing countries. This is mainly because underdeveloped nations lack access to credit systems, which leads to less ownership.
Are there exceptions to the trend of poor nations owing the least amount of debt per person?
Yes. There are wealthy countries like New Zealand and Taiwan that buck the trend. But, for the most part, these are the exceptions and not the rules when it comes to debt.
In my opinion, the amount of global debt is staggering. You all know how much I dislike debt. Hopefully, it doesn’t bite the world in the collective butt in the end.
At first I find it comforting that we’re not in the #1 spot/capita. But then I remember that we’re still way up there. Interesting look at the problem tho.
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I have to admit that I was shocked at the places with higher debt levels. Definitely not what I was expecting.
I don’t like the amount of debt either Rob. The new tax code bothers me. My taxes will most certainly be going up and yet the code is projected to increase our national debt. Taxes are a zero sum game, some benefit, some lose and the net difference increases or decreases national debt. It just doesn’t sit right with me for the same reasons as you. I am personally debt averse. Tom
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I’d love to see a politician be honest and say this is going to hurt but we’re going to pay off our debts. It’s getting out of control and unsustainable. I doubt it happens but I’d love to see it 🙂
I am very aware of the debts that developed countries are racking up. In good times, these countries run a deficit. In bad times, they do even worse. They mortgage the future to pay for their expenses today. In simple terms, these politicians are not living within their means. They are spending to keep themselves in the office.
As a result, I don’t trust the public pension plan or any company plans when it comes to my retirement. I put my retirement savings in my own account so that I am making myself accountable for my own retirement wellbeing. I can’t trust politicians with my money.
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Thanks for sharing Leo!!! You said it better than I could ever say so. I definitely am disappointed with where politicians are moving. I’d love to see politicians stay within the means.
That is so freaky. It is fine when its a monstrous number but when it is a small per person number…
I’m shocked that we aren’t #1. It scares me that everything is just hanging by a thread right now.
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I’m with you Budget on a Stick!!! When you see how it affects you it definitely is an eye opener 🙂
Debt is fine as long as it used to improve the economy. Running a debt is not necessarily a bad thing. If our government invests the money in our infrastructure it would be long term win. Given the interest rates it is definitely not a bad idea to borrow for capital expenditure. It’s only a problem if money is blown away on questionable items.
I believe the same applies to households. If I get a loan for 2% and invest in lets say VYM. VYM has a yield of 2.85%. So, theoretically I could get 0.85% in addition to making interest payments. Even if the market tanks I could still keep paying the interest.
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I definitely agree with your thinking although I’m not always convinced politicians make great investments from what I’ve seen recently 🙂
Lol it seems like most people think debt is just “a normal part of life” these days.
But at the end, I think it depends on the person’s debt relative to their assets and relative to their income. As long as the debt is making them money, then I think it’s fine w/ caution of use of course. If their debt to asset ratio isn’t high, AND if their income is more than sufficient to cover any form of debt payments, then I think it’s fine (assuming they are using it as some form of investment).
Some people play it 100% safe and avoid all debt, which is fine too. It’s a matter of comfort and how they feel.
Now, consumer debt or debt that just doesn’t make sense would be a different story…
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Thanks for sharing!!! I definitely agree that it’s important to differentiate between debt that can help build you assets and debt that increases your liability 🙂 Although I’m not always sure people recognize the differences 🙂
Debt gets a bad reputation because it is easily abused or misused. If you can borrow at 4% and get a return of 6%, why wouldn’t you borrow? Simple arbitrage. Sometimes, the 4% is fixed & known while the 6% if floating & unknown. The unknown part gives some people heartburn. Also, people are frequently borrowing to spend on items that give zero return or basic living expenses (i.e. credit card balances).
At today’s mortgage rates, I think it is poor advice for people to always pays off their mortgage ASAP in the name of eliminating debt. Depending on the terms of that debt (interest rate & tenor), many people would be better off investing in a low-cost index fund or ETF rather than paying off their debt.
I’m not necessarily against debt, it’s a very useful tool if used correctly. I’m of the opinion that segment of society does not use debt correctly for wealth building and use it for lifestyle wants. I think a lot of politicians care about the here and now and not about the future which is unfortunate.
I am very concerned of the debts that developed countries have accrued; it’s not just government, household debt is at nosebleed levels. At some point debt will matter. When? Who knows It could be decades from now.
I hope we don’t get to that level. Hopefully we get politicians voted in that care about this thing in the future 🙂