In the world of finance, there is perhaps no more hotly debate issue than debt. One the one end of the debate are observers who worry about what a debt collapse could do to the global economy. One the other end of the discussion are analysts who see debt as necessary for current growth. Essentially, they place greater weight on current growth over future growth.
One thing both camps agree on – debt will eventually be a problem.
The Debt Picture
Let’s look at the debt picture. Before reviewing the figure below, which country would you guess has the highest debt per GDP (Gross Domestic Product) figure?
Would you guess a European country has the highest debt to GDP? Shaming European countries for debt is a pastime of financiers.
What about an African country? Growth has struggled to produce high-quality living standards for many in the African continent. Did some turn too much to debt?
What about the United States? Are they a guilty party to the debt contagion?
Perhaps an Asian country. China has been growing quickly in recent years. Is some of that growth fueled too much by growth? What about Japan? Business in Japan has been relatively weak for a while, perhaps they have turned to the debt markets too much to generate growth?
The chart above goes from light yellow to dark brown. Countries with a dark brown coloring are the most heavily indebted countries. The least indebted countries are lightly colored yellow.
Curiously, the most highly indebted country is Japan. The Japan debt burden is an enormous 253% of GDP.
Which country is next in line? Greece. The problem child (well, at least one of the problem children) has a massive debt of almost 179% of GDP. That will never be repaid.
Rounding out the most heavily indebted countries are Lebanon (149% of GDP), Italy (132% of GDP), and Portugal (126% of GDP).
The Least Indebted
What about the least indebted countries?
The five least indebted countries are Brunei (2.8% of GDP), Afghanistan (7.6% of GDP), Estonia (9% of GDP), Swaziland (10.0% of GDP), and Russia (12.6% of GDP). A complete listing of debt to GDP follows at the end of this article.
Why Does Debt Matter for Gold?
The question here is a direct investment question. Why would individuals concerned about hedging a debt collapse be interested in gold?
The answer is simple. When debt becomes a large problem, every country that has a large debt problem will attempt to inflate their way out of debt. Essentially, they will attempt to print currency to pay their debt bills. This solution, of course, is not possible for many countries with their debts denominated in dollars, euros, or renminbi. In these cases, the only solution is debt restructuring or default – both of which are usually terrible solutions for an economy.
In all of these cases, the hedge against problems is gold. Gold hedges against inflation. The precious metal also provides a backstop against deteriorating economies and stock markets. Gold is, in essence, a safety valve – an asset worth diversifying into before trouble is at the door.
Country |
Last |
---|---|
Japan |
253 |
Greece |
178.6 |
Lebanon |
149 |
Italy |
131.8 |
Portugal |
125.7 |
Cape Verde |
125.3 |
Congo |
117.7 |
Singapore |
110.6 |
Bhutan |
108.64 |
United States |
105.4 |
Jamaica |
103.3 |
Belgium |
103.1 |
Egypt |
101.2 |
Spain |
98.3 |
Cyprus |
97.5 |
France |
97 |
Jordan |
95.6 |
Djibouti |
90.7 |
Bahrain |
90.6 |
Canada |
89.6 |
Mozambique |
88.2 |
Sao Tome and Principe |
87.5 |
Euro Area |
86.7 |
United Kingdom |
85.3 |
Yemen |
83.5 |
European Union |
81.6 |
Mongolia |
79.4 |
Austria |
78.4 |
Croatia |
78 |
Sri Lanka |
77.6 |
Zimbabwe |
77.6 |
Mauritania |
77.3 |
Brazil |
74.04 |
Hungary |
73.6 |
Slovenia |
73.6 |
Ukraine |
71.8 |
Ghana |
70.5 |
Albania |
69.92 |
Tunisia |
69.2 |
India |
68.7 |
Ireland |
68 |
Bahamas |
67.8 |
Belize |
67.4 |
Pakistan |
67.2 |
Gabon |
66.5 |
Gambia |
65.6 |
El Salvador |
65.52 |
Angola |
65.1 |
Costa Rica |
65.1 |
Mauritius |
64.9 |
Germany |
64.1 |
Iraq |
63.8 |
Morocco |
63 |
Montenegro |
62.5 |
Seychelles |
62 |
Serbia |
61.5 |
Vietnam |
61.5 |
Finland |
61.4 |
Israel |
60.9 |
Sierra Leone |
60.3 |
Suriname |
57.48 |
Argentina |
57.1 |
Kenya |
57.1 |
Netherlands |
56.7 |
Zambia |
55.6 |
Malawi |
54.7 |
Qatar |
54.4 |
Kyrgyzstan |
53.9 |
Equatorial Guinea |
53.8 |
Sudan |
53.5 |
Guyana |
53.4 |
South Africa |
53.1 |
Malaysia |
50.9 |
Slovakia |
50.9 |
Malta |
50.8 |
Poland |
50.6 |
Uruguay |
50.6 |
Laos |
50.03 |
Dominican Republic |
49.12 |
Colombia |
48.5 |
Tajikistan |
47.8 |
Chad |
47.6 |
China |
47.6 |
Nicaragua |
46.8 |
Azerbaijan |
46.4 |
Mexico |
46.4 |
Lesotho |
46.3 |
Bolivia |
45.7 |
Trinidad and Tobago |
44.4 |
Fiji |
44 |
Georgia |
43.9 |
Iceland |
42.3 |
Armenia |
42.23 |
Philippines |
42.1 |
Australia |
41.9 |
Madagascar |
41.9 |
Thailand |
41.8 |
Namibia |
41.5 |
Sweden |
40.6 |
Rwanda |
40.2 |
Latvia |
40.1 |
Oman |
39.9 |
Lithuania |
39.7 |
Panama |
39.2 |
Central African Republic |
38.8 |
Macedonia |
38.7 |
Uganda |
38.6 |
Honduras |
38.45 |
Hong Kong |
38.4 |
South Korea |
38 |
Tanzania |
37.4 |
Senegal |
37.1 |
Myanmar |
36.75 |
Turkmenistan |
36.5 |
Denmark |
36.4 |
Norway |
36.2 |
Cameroon |
35.7 |
Cambodia |
35.1 |
Romania |
35 |
Czech Republic |
34.6 |
Moldova |
34.4 |
Ethiopia |
33.5 |
Papua New Guinea |
33.5 |
Haiti |
32.6 |
Ecuador |
32.5 |
Iran |
32.1 |
Taiwan |
31.2 |
Syria |
30.01 |
Niger |
29.7 |
Switzerland |
29.7 |
Belarus |
29.6 |
Liberia |
28.8 |
Indonesia |
28.7 |
Turkey |
28.3 |
Guinea Bissau |
28.1 |
Comoros |
27.6 |
Bangladesh |
27.1 |
Kuwait |
27.1 |
Nepal |
26.8 |
Bosnia and Herzegovina |
26 |
Maldives |
25.6 |
Peru |
25.5 |
Guatemala |
24.76 |
Ivory Coast |
24.5 |
Burkina Faso |
24.4 |
Paraguay |
24.1 |
Chile |
23.6 |
Luxembourg |
23 |
Venezuela |
23 |
Bulgaria |
22.6 |
Botswana |
22.3 |
New Zealand |
22.2 |
Benin |
22.1 |
Nigeria |
21.3 |
United Arab Emirates |
20.7 |
Eritrea |
20.1 |
Togo |
19.6 |
Guinea |
18.66 |
Algeria |
17.7 |
Palestine |
17.5 |
Kazakhstan |
17.4 |
Saudi Arabia |
17.2 |
Republic of the Congo |
17 |
Kosovo |
16.63 |
Libya |
16.5 |
Cuba |
15.4 |
Cayman Islands |
14.5 |
Burundi |
14.4 |
Uzbekistan |
14.1 |
Russia |
12.6 |
Swaziland |
9.95 |
Estonia |
9 |
Afghanistan |
7.6 |
Brunei |
2.8 |