Debt bur­den and the world

Bhutan Times - - Home - AK Mishra, Man­ag­ing Di­rec­tor, MHPA

Nei­ther a bor­rower nor a lender be” Shake­speare’s Polo­nius warns his son Laertes. Today, many Gov­ern­ments are bor­row­ing money. Bor­row­ing al­lows Gov­ern­ments to cover short­falls with­out hav­ing to in­crease taxes or cut back pub­lic spend­ing. But too much debt can hurt economies, es­pe­cially in a re­ces­sion.

The US just passed $20 Tril­lion in debt for the first time, while the UK owes £1.9 Tril­lion ($2.5 Tril­lion). The US and UK are not the most in­debted coun­tries, if com­pared with other coun­tries.

Ja­pan’s debt reached 221.8% of GDP in 2015, ac­cord­ing to the OECD (Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment) Glance Re­port. If the Ja­panese wanted to pay off their Na­tional debt, they would owe $90345 each. Sim­i­larly, the Ire­land, US & Italy per capita debt is around $62687, $61539 & $58693. While the OECD debt av­er­age is around $50245.

Per capita debt among OECD coun­tries has in­creased at an av­er­age an­nual rate of 5.9% since year 2007. The fol­low­ing two plots be­low are drawn for Euro­pean Coun­tries and US show­ing the Per­cent­age of Gross Debt on Gov­ern­ments with re­spect to their GDPs and sim­i­larly, the other plot presents Gross Debt per Capita in terms of Pur­chas­ing Power Par­ity (PPP).

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