International Debt Problem

There was a man with enough money to lend a big chunk of it to a man from a faraway land who offered him a high rate of return. The foreigner, though, splurged some of it on the easy living, was careless and had some of it stolen, and didn’t do too well with investments, so there were no returns to give back to his lender. He was in trouble, along with the lender who, not wanting to admit his own mistake in lending to the man in the first place, lent some more money hoping that the foreigner would finally succeed and pay it back with returns. But the debtor continued wasting money same as before and the lender ended up in serious financial issues.

This simple story can sum up the global debt crisis we found ourselves in. It started in the 70’s, soon after the US Federal Reserve System cut the tie between the gold and the dollar. With too many dollars on the market, banks were stocked up with new deposits and the developing countries seemed like a great place to invest. The lending continued and the mess kept getting bigger.

Currently, the countries with the highest Debt-to-GDP ratio in 2020 are: 1 Japan 266.2%
2 Sudan 259.4%
3 Greece 205.2%
4 Eritrea 185.8%
5 Lebanon 171.7%
6 Italy 161.8%
7 Suriname 145.3%
8 Portugal 137.2%
9 Cabo Verde 136.8%
10 Belize 134.6%

Japan has a sky-high debt-to-GDP but over 90% of it is held domestically.

But national debt doesn’t always indicate financial stability. There is only one “debt-free” country as per the IMF database. For many countries, the unusually low national debt could be because they failed to report actual figures to the IMF.

Low national debt might also be a bad sign if a country’s economy is so underdeveloped that nobody would want to lend to them. Here are the ten least indebted nations in the world in 2020 as per the IMF’s reported data:

1 Macao SAR 0%
2 Hong Kong SAR 0.3%
3 Zimbabwe 2.4%
4 Brunei 3.2%
5 Afghanistan 7.8%
6 Timor-Leste 11.7%
7 Solomon Islands 15.3%
8 Tuvalu 16%
9 Congo 16.1%
10 Federated States of Micronesia 16.5%

The bottom line is that government borrowing is a tax on unborn generations. The U.S. national debt is now $27.8 trillion and rising. While the government isn't too worried about it right now, the people will suffer the consequences sooner or later.

Sources: https://commodity.com/data/debt-clock/ https://fee.org/articles/the-international-debt-crisis/ https://www.politico.com/news/2021/01/26/wall-street-national-debt-462453 https://www.investopedia.com/updates/usa-national-debt/ https://www.washingtonpost.com/business/2021/01/14/trump-legacy-national-debt-increasee/ https://en.wikipedia.org/wiki/Debt-trap_diplomacy