The world has never been in this much debt. Global debt levels rose by $21 trillion last year to $237 trillion, the highest level on record
The catch, of course, is that you probably could have written the same headline each of the past 50 years. World debt goes up every year as each country’s economy, and the world’s economy, grows.
That doesn’t in any way that I have any comprehension of how big or dangerous the world debt is? I’m just commenting on the scare headline. It’s always the highest on record.
The biggest misconception that economists have is thinking that gold money and fiat money are the same. How can you go broke if all you pledged was to give the creditor a new piece of paper for the old piece of paper? That’s all that fiat money pledges. Having to return an equal weight in gold is a different matter. What distinguishes the USA from the rest of the world is that the US dollar is accepted world wide as the base of all currencies, i.e. the world’s “reserve currency.”
No, just understand the headlines: For example “S&P hits all-time high!” doesn’t mean it’s wildly over-extended so you should sell out. It probably hit all-time highs 50 times last year, and if you sold at the first you would have missed the other 49, etc.
Here’s a quick visual snap shot that shows how U.S. debt compares to other countries around the world in terms of debt-to-GDP ratio which is a critical metric for evaluating a country’s fiscal health:
THE FINANCIAL IMPACT OF SOVEREIGN DEBT AROUND THE WORLD - 2017
A visual map shows countries’ debt and their ability of pay it back https://howmuch.net/articles/worlds-debt-2017
Excerpt: Our visualization allows you to quickly see how the U.S. government’s debt compares to other countries around the world.
The debt-to-GDP ratio is a critical metric for evaluating a country’s fiscal health. It makes a lot of sense for the American government to have a higher debt than a much smaller country, like Germany. Think about it like this: Bill Gates is worth $86 billion, so he can afford a much higher credit card bill than me or you. That’s why it’s important to consider the Gross Domestic Product (GDP) of each country, a number which represents the sum of all transactions occurring in the economy. Once you understand the public debt as a percentage of GDP, you get a level playing field for countries on different economic scales. When you think about it like this, the U.S. isn’t even among the ten worst sovereign debts in the world.
There’s another reason why $20+ trillion in debt isn’t that big of a deal. The U.S. has a huge debt load both in real terms and as a percentage of GDP, but people around the world don’t hesitate to loan it money at extremely low interest rates. That’s because it’s still seen as an incredibly safe investment.
Monetary policy and sovereign debt are complex topics. You can get an advanced degree in this stuff, and not quite understand it. We aren’t saying $20+ trillion in debt is a good thing, but all in all, the U.S. is still in pretty good shape, especially compared to other developed economies around the world.
I’ve often found that maps (and other graphics) like the one you cite can be misleading. Here is a website with a plethora of interesting economic plots. Check out the various Debt-to-GDP variations.
DT
Plethora of charts - Did not look at most of them, but noticed that the one’s I looked at were several years out of date. Not sure this information is relevant to today’s situation.
Oh yes, they talk about the fourth largest point drop in the Dow ever, when it’s perhaps the 50th largest percentage-wise.
Fear mongering specifically directed to morons who don’t think for themselves or are really bad at math or both. Run for the hills everyone!
Everything is relative. Lee Trevino (famous golfer back yonder) was once asked if he was nervous making a put to win a tournament. He said no. He was nervous as a youngster when playing in a $100 pick up game while only having $5 in his pocket.
Starting as an early investor with little money, a wrong stock pick was pretty devastating. However, I deal with much larger fluctuations on a dollar basis today that have little to no effect on my outlook. Part of it is being a better investor, and part of it is simply just percentages.
Ignore the fear mongering, or better yet, understand why it is simply noise and move on.
“Fear mongering specifically directed to morons who don’t think for themselves or are really bad at math or both. Run for the hills everyone!”
Absolutely right, AJ. CNBC is especially guilty of breathlessly telling us how the world is coming to an end financially. It may attract viewers, but it can be devastating to portfolios.
Plethora of charts - Did not look at most of them, but noticed that the one’s I looked at were several years out of date. Not sure this information is relevant to today’s situation.
You are right. The specific charts of GDP vs. Debt are very out of date. Strange since most of the others are current. Not sure what is up with that?