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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.
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.