The First Half of the 21st Century-the Debt Era?

Fifty years from now, when economists debate the major themes of the first half of the 21st century, could the first half be known as the debt era?

Debt to GDP

Here’s a map of the global debt to GDP landscape. Perhaps completely unsurprising to seasoned professionals in the investment banking world, the map shows the dominance of debt in European countries.

European countries are, of course, not alone.  Some other high debt load countries include Japan, the United States, Indonesia, China, and a few others.  Of this group, probably the only really surprising member is China.

Also interesting when looking at the geography behind the debt picture is the lack of large debt burdens in Russia and many South American countries.  One likely explanation for this is the concern bond markets have for the stability of the given countries’ financial systems.

The Debt Era

Detailed Views

Europe

Here’s a detailed view of Europe. As mentioned, European countries are loaded with debt. The highest on the debt list is Ireland at 390%.  Ireland’s profligacy is followed by Portugal, Belgium, Netherlands, and Greece.

Other European countries with debt burdens above the 200% watermark are Spain, Denmark, Sweden, France, Italy, United Kingdom, Norway, Finland, Austria, and Hungary. Interestingly, the strongest members of the EU – Germany – has a relatively low debt burden at 188%.  Guess it pays to be efficient and prudent.

The Debt Picture in Europe

South America

The debt picture is somewhat different in South America. The country with the highest debt load is Brazil at 162%.

The Debt Picture in South America

Asia

The debt picture in Asia is somewhat surprising. Of the interesting numbers is the lack of profligate spending in Russia, with a debt to GDP burden of only 65%. On the other end, some of the world’s most highly indebted countries call East Asia home, including Japan at 400% and Singapore at 382%. Also interesting is the 217% debt burden in China.

The Debt Picture in Asia

North America

In North America, the U.S. has the highest burdened citizens at 233%, followed by Canada at 221%. The other end includes Mexico at a mere 73%.

The Debt Picture in North America

The Table

Here’s a table view of the debt to GDP picture.

Debt to GDP

What Has Debt Done Since 2007?

Certainly, some of the massive debt expansion has the global financial crisis of 2007 to 2008 to blame. Here’s a look at how the debt picture has changed since 2007 to 2014 Q2.

The column on the farthest left is debt to GDP. The second column is total debt growth since 2007. The third column is corporate debt growth since 2007. The fourth column is household debt expansion since 2007. The right column is the debt change in the financial sector since 2007. A couple of things stand out.

First, government debt has exploded much quicker than household or corporate debt.

Second, it’s hard to tell which sector expanded quicker overall – corporations or households – indicating that the two have a closer view of the usefulness of debt than governments do.

Debt Picture Change, 2007 - 2014

Conclusion

Overall, debt picture is part surprising, part alarming, and part amusing. There’s lot of ways the debt world could deal with the massive debt loads in various areas of the world, but one thing is certain.  It will have to be dealt with sooner rather than later, regardless of what current Greek politicians think.

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