Japan and Singapore are at the top of the global leaderboard when it comes to prevailing debt-to-GDP ratios although China is catching up quickly. 

 

The US, or maybe an Italy or a Greece, are usually taken to task as veritable examples of financial profligacy when it comes to the flotsam of government detritus clogging the fixed-income markets of the world.

But there are new sovereign villains of fiscal recklessness on the horizon for the average banker to fret and despair about, a graphic by Visual Capitalist released on Friday shows.

Japan First, Singapore Third

The figures, based on International Monetary Fund data, show that when it comes to debt-to-GDP ratios, Japan unequivocally comes in first at what must be a very hard-to-service 252 percent.

Although that may be of relatively little surprise to bond market traders, the fact that Singapore follows in third place at 168 percent is likely to at least raise an eyebrow here or there.

Indebted Europe

After that, the usual continental European suspects follow in tow. Greece is in fourth place at 160 percent, followed by Italy (143 percent), and France (110 percent). However, the latter’s prominence in this dubious ranking remains a sore sticking point in the televised debates surrounding national legislative elections currently underway.

By that token, the US, which places sixth with a debt-to-GDP ratio of 126 percent, looks distinctly average - at least from the perspective of using a particular number and dividing it by another.

Other Considerations

But that is also where the usefulness of using ratios as an overarching gauge for everything ends. The total stock of outstanding US government debt is almost $70 trillion, Visual Capitalist believes. By itself, that lone figure sheds an entirely new light on the temptations offered to those elected officials who can’t help themselves from flirting with the dark side of finance.

It stands out there, isolated, a sore thumb, a sole mountain peak of unfathomable size, towering over the surrounding, much-reduced pampas of generalized, sovereign fiscal prudence.

Debt Deniers

If mentioned verbally, it silences the loudest of North American debt deniers in expert circles who otherwise all too easily ping pong between percentages and total stock when trying to make categoric, subjective points in quickly forgotten discussions. 

But the interesting thing for the devotees of the total stock faction is that there is a new kid on the block called mainland China.

Coming from Behind

Although it still has a relatively manageable debt-to-GDP ratio of 87.4 percent, Visual Capitalist estimates that its total debt stands at $47.5 trillion, a figure that is surprisingly not that far off from the US and likely the second highest worldwide.

According to the online publisher, this is because the mainland has played a significant role in the recent surge of global indebtedness and it now has the largest share of non-financial corporate liabilities in the world. And we are not even talking about the real estate crisis here, although everyone in their right mind would have to keep that in the back of their minds as a factor driving some of this.

Secular Trend

While it is easy to predict the popping of an imminent bubble worldwide from current developments, the more objective banker might instead say that this has been a secular trend for the past 50 years.

Regardless of the form of government or type of economy in our fractured, increasingly geopoliticized world, global public debt has tripled since the mid-1970s to reach a total of 92 percent of GDP at the end of 2022, while on the private side, it has surged to 146 percent of GDP between 1960 and 2022, as Visual Capitalist pointed out.

Bad Memories

The surprising thing is, as finews.asia commented earlier this year, that the 1997 debt crisis and the ensuing IMF rescues live on as a kind of financial PTSD in the minds of many.

Still, back then, the mainland was one of the places that wasn't as severely affected.  In hindsight, that may come to be seen as ironic or logical, although it is not yet clear which of the two it will become.