Global debt currently stands at $305 trillion, $45 trillion higher than before the COVID-19 pandemic, according to the Institute of International Finance (IIF) – a global association of the financial industry.
Global debt is the total amount of money owed by corporations, governments and individuals around the world. Of the $305 trillion of debt, corporations account for $161.7 trillion (53 percent), governments owe $85.7 trillion (28 percent) and individuals comprise $57.6 trillion (19 percent).
The IIF predicts that global debt will continue to rise as government borrowing remains high, affected by factors such as ageing populations, geopolitical tensions, increased costs of healthcare and disparities in climate finance.
Which countries have the most debt?
Government debt represents the outstanding financial liabilities of a country, made up of different categories such as loans and debt securities.
The IIF’s Global Debt Monitor covers 21 mature market economies including the eurozone as well as 30 emerging market countries.
The United States has the world’s highest national debt with $30.1 trillion owed to creditors as of the first quarter of 2023. Washington’s debt now stands at $31.4 trillion, raising further concerns about US government spending and borrowing costs.
To put that in context, the US owes as much money as the next four countries with the highest debt including China ($14 trillion), Japan ($10.2 trillion), France ($3.1 trillion) and Italy ($2.9 trillion).
The chart below ranks government debt around the world.
Which countries have enough money to pay back debts?
Countries with high levels of debt may offset their payments if their gross domestic product (GDP) – a measure of the total value of the goods and services a country produces – is higher than their national debt.
A government’s debt-to-GDP ratio, which compares the size of a country’s debt with its economy, is one indicator of a government’s financial sustainability. Any value greater than 100 percent indicates a country is spending more than it is making.
According to IIF, global governmental debt-to-GDP stands at 95.5 percent.
Japan, the world’s third largest economy, has the highest debt-to-GDP ratio at 239 percent. Tokyo’s high debt-to-GDP ratio can be partly attributed to its ageing population and social welfare costs.
Greece has the second highest debt-to-GDP ratio at 197 percent, followed by Singapore (165 percent), Italy (135 percent), and the US (116 percent).
What is the US debt ceiling?
The debt ceiling is the maximum amount of money the government can borrow. On January 19, the US hit its borrowing limit of $31.4 trillion. Since then, the Treasury has implemented a number of measures to avoid failing to pay back its legal obligations, known as a default.
A US default would likely push the country into a major recession, shake the world economy and lead to a spike in unemployment.
On May 28, after weeks of negotiations, US President Joe Biden and Republican House Speaker Kevin McCarthy, reached a tentative deal to raise the debt ceiling for two years while capping some spending.
After calling for a recorded vote, the House of Representatives voted to advance the bill 314 – 117 in a late night sitting on Wednesday.
The United States has the world's largest national economy but comes in second for most indebted country. The U.S.'s steadily rising debt-to-GDP ratio
debt-to-GDP ratio
In economics, the debt-to-GDP ratio is the ratio between a country's government debt (measured in units of currency) and its gross domestic product (GDP) (measured in units of currency per year).
https://en.wikipedia.org › wiki › Debt-to-GDP_ratio
As of 2023, the United States' debt-to-GDP ratio is among the highest in the developed world, behind only Japan and Italy. However, the United States has long been the world's largest economy, with no record of defaulting on its debt. Moreover, the U.S. dollar has been the world's reserve currency since the 1940s.
Even the CBO as recently as September 2023 projected the figure to be higher—estimating an 153% debt-to-GDP ratio by 2053. The GAO puts debt at 200% of GDP by 2050, while the Penn Wharton Budget Model projects 190% of the size of the economy by the same year.
Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
The biggest holder of US sovereign debt is the US Federal Reserve. The next largest block of debt holders are US corporations and individuals. Under 20% of the total debt is owned by foreign entities. All sorts of holders of U. S. Treasuries (bills, notes, bonds): private citizens.
How is the U.S. rich if it's in so much debt? Short answer is the debt that the US owes can easily be covered by the revenue (ie taxes, fines, etc) it collects within a year, and maintain it's operations. The important part about debt is that it's isn't all due immediately.
It began rising at a fast rate in the 1980's and was accelerated through events like the Iraq Wars and the 2008 Great Recession. Most recently, the debt made another big jump thanks to the pandemic with the federal government spending significantly more than it took in to keep the country running.
If the U.S. was to pay off their debt ultimately, there is not much that would happen. Paying off the debt implies that the government will now focus on using the revenue collected primarily from taxes to fund its activities.
Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.
Why History Shows the United States Will Not Grow Out of Its Debt. The United States is approaching record levels of debt. Debt held by the public totaled 97 percent of gross domestic product (GDP) at the end of 2022 and is on track to exceed its previous all-time high, which occurred just after World II, by 2029.
Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder is purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond market and reduces their sensitivity to credit rating changes.
There are two kinds of national debt: intragovernmental and public. Intragovernmental is debt held by the Federal Reserve and Social Security and other government agencies. Public debt is held by the public: individual investors, institutions, foreign governments.
If China (or any other nation that has a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.
According to BIS data, the debt leverage of China's non-financial corporate sector (compared to GDP) has been outrageously high since the available data. In the first quarter of 2023, China's non-financial corporate sector debt-to-GDP ratio reached 165%, while the US only had 77.2%.
As reported by the US Department of the Treasury, the US owes a total of $7.4 trillion in Treasury securities to foreign countries. Foreign countries buy US Treasury securities since they are considered as one of the most secure assets.
Introduction: My name is Corie Satterfield, I am a fancy, perfect, spotless, quaint, fantastic, funny, lucky person who loves writing and wants to share my knowledge and understanding with you.
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