Sovereign debt as a % of GDP can be misleading. GDP can be misleading; it does not distinguish consumerism from production. So nations with a high GDP but with a primarily import economy may have a harder time paying off their sovereign debt. And so here are the top 6 countries when it comes to external debt.
Now a word of warning, this list is equally misleading, because it does not take into account debts owed to the country in question nor overseas assets and it includes private debt as well. So it is more of an analysis of the economy of the country as a whole in terms of production vs consumption.
I was going to make this another top 5 but when I saw number 6 on the list I couldn't help myself. The cause of their $2,246,000,000,000 USD debt is the same reason for its public debt, their boomer generation has grown old and now consumes much more than they produce.
I have no idea why Netherlands is on this list with a debt of $2,344,296,360,000 USD. I did a little bit of digging and the Dutch economy is strong, in fact they have a trade surplus. Each year their exports earn a lot more than their imports. That said the Netherlands does have a nice hefty 62.7% public debt by GDP but this is less than half a trillion dollars. It could be explained by the trade side of their economy. Typically trade economies have a large amount of both creditors and debtors and this may have skewed the figures.
With the second largest economy in Europe, France is number 4 on the list with a debt of $4,698,000,000,000 USD. While France does have a large economy, it has has a large trade deficit. French imports exceed exports and let's not forget their whopping large public debt (~1.6trillion USD)
Germany has the largest economy in Europe and has an even bigger external debt than France. Like the Netherlands, it is puzzling to see Germany on this list because Germany has a marginal trade surplus. Some of this is undoubtedly due to Germany's large public debt of approximately ~2.5 trillion USD. Germany's external debt is $4,713,000,000,000USD
2. United Kingdom
In second place with an external debt of $8,981,000,000,000USD is mother England. So how did the UK claim it's rightful place as number two? Britain had it's hey-day back in the colonial era where it made a tonne of cash by exploiting the colonies and this got even more lucrative with the industrial revolution. One particularly large trade triangle was between Africa and the US. Slaves were shipped over to America from Africa by British trading ships and then the US would ship basic foodstuffs and raw materials to Britain who would then make manufactured goods and ship it back to America.
Unfortunately for Britain, after the American Civil War, the US had its own manufacturing industry and it was booming. Britain could not compete with it.
Another source of income for Britain was colonial debt. When England colonized places like Australia they gave the colony the bill to pay for their big investment in colonizing the place. The colonies have been paying off their debt since.
In World War 2 though, Britain borrowed a lot of money from the US to keep their war effort going. After the war, the US used this debt to pressure. England into giving up her precious colonies. Ever since, the UK has been an import economy and has been racking up debt.
And the WINNER is..................................
1. The United States of America. That's right, The US is still number one when it comes to gross debt. Back in September 2010 the US debt ascertained the lofty height of $14,392,451,000,000 and it is only growing larger. Why is it so high? Partially because of it's public debt but also due to it's economy as a whole. The US, like the UK, had it's peak but now its manufacturing industries have long since died to the Asian markets. The US is now an import economy and is losing money. Remember how I said in my last post that the US could pay off it's debt? I take that back. How do you pay off a debt when the nation's GDP is all imports?
So to my American audience, be proud. You are still number one!