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.
As of July 20, 2020, debt held by the public was $20.57 trillion, and intragovernmental holdings were $5.94 trillion, for a total of $26.51 trillion. Debt held by the public was approximately 77% of GDP in 2017, ranked 43rd highest out of 207 countries.
United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%. The United States' government's spending exceeds its income most years, and the US has not had a budget surplus since 2001.
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).
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.
The $34 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.
Who owns the most U.S. debt? Around 70 percent of U.S. debt is held by domestic financial actors and institutions in the United States. U.S. Treasuries represent a convenient, liquid, low-risk store of value.
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.
In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.
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.
Intragovernmental debt accounts for 26 percent or $5.9 trillion. The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt. Individual investors and banks represent 15 percent of the debt.
While we owe the communist country more than $800 billion, our government sent nearly $500 million to China to pay for everything from poetry projects to dangerous research on bats. And $870 million of U.S. tax dollars went to Russia.
The case of debts arising from World War II is somewhat less complicated. At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.
Nearly all of that debt – about $31.38 trillion – is subject to the statutory debt limit, leaving just $25 million in unused borrowing capacity. For several years, the nation's debt has been bigger than its gross domestic product, which was $26.13 trillion in the fourth quarter of 2022.
The national debt is currently almost the same size as the entire U.S. economy, which is roughly $27.3 trillion, according to a Council on Foreign Relations report, and is on track to double within the next thirty years.
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.
This includes mortgages, home equity revolving debt, auto loans, credit cards, student loans and other consumer lending such as retail cards. The total household debt of $17.3 trillion entering 2024 is a new high for the U.S.
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