"We risk becoming the best informed society that has ever died of ignorance"
- Rubén Blades

"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it"
- Art Buchwald

"It's getting exciting now, two and one-half. Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium"
- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Tuesday, February 21, 2012

Paying Off Government Debt - Two Centuries Of Global Experience

Source: WilliamBanzai7
A paper written by Bryan Taylor (embedded below the graphs), Chief Economist at Global Financial Data, exposes the history of 12 large nations and their corresponding Debt/GDP levels.  The papers shows that Debt/GDP ratios have no cut off limit, most exceeded 100% at some point in history and in some cases hit 200%.  This rise in the ratio is not attributed to a constraining economy (aka financial crisis).

What aids in the creation and spreading of financial crisis' is when the interest coverage on the debt exceeds 5%.  The author cites the UK and Japan as examples where high debt didn't spark a crisis but did make it more difficult to break the debt burden.  The important factor is what the debt characteristic is, is it short-term due to war or economy fluctuations, or secular debt due to unfunded increases in government spending?  When it comes time for the debt to be paid however, the taxpayers seem the bear the burden though higher taxes and fees as opposed to the government workers paying through lower wages and lower benefits.

Australia Debt (1850 - 2010)

Canada Debt (1870 - 2010)

France Debt (1850 - 2010)

Germany Debt (1870 - 2010)

Italy Debt (1860 - 2010)

Japan Debt (1885 - 2010)

Netherlands Debt (1850 - 2010)

Spain Debt (1850 - 2010)

Sweden Debt (1880 - 2010)

Switzerland Debt (1925 - 2010)

United Kingdom (1800 - 2010)

United States (1790 - 2010)

Government Debt Paper -