Why size doesn't matter (that much) when it comes to debt

To paraphrase US Senator Everett Dirksen, a trillion here, a trillion there, pretty soon it adds up to real money. Largely using data from National Debt Clocks. Org I put together my own chart to examine the relationship between debt, GDP and interest rates.

If you think nobody cares if you're alive, try missing a few car payments.
Earl Wilson, New York columnist

The amount of the debt, and it's percentage of GDP is commonly quoted but the really interesting part is how much of the country's income is going to service this debt. Both government GDP and gross debt figures are relatively easy to get. I used National Debt Clock for the purposes of easy and reliable comparisons.

Washington Post

However, the interest paid on the debt will be determined by the rate at any one time. This makes this calculation reasonably difficult. I have chosen to input each countries 10yr treasury bond as the interest rate payable.

Interest on debts grow without rain.
old Yiddish proverb

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When you get in debt you become a slave.
US President Andrew Jackson (slave owner).

Country	National Gross Debt $Tn	GDP $Tn	Interest rate % (10 yr bond)	Debt to GDP %	Cost of Servicing of Debt $Bn	Interest payments to GDP %
Brazil	1.571284	2.032810	12.1	0.77	190.13	9.35
Greece	0.404361	0.207736	4.5	1.95	18.20	8.76
Pakistan	0.212263	0.290447	8.5	0.73	18.04	6.21
Turkey	0.237369	0.855322	18.3	0.28	43.44	5.08
South Africa	0.201402	0.374946	9	0.54	18.13	4.83
Singapore	0.532422	0.305123	2.6	1.74	13.84	4.54
India	1.169839	2.259500	7.9	0.52	92.42	4.09
Mexico	0.500168	1.049854	8	0.48	40.01	3.81
Italy	2.780051	2.005293	2.5	1.39	69.50	3.47
Colombia	0.133401	0.277700	6.6	0.48	8.80	3.17
Malaysia	0.178390	0.238945	4.2	0.75	7.49	3.14
US	21.107265	19.754300	2.9	1.07	612.11	3.10
Hungary	0.108728	0.139595	3.5	0.78	3.81	2.73
Portugal	0.299165	0.221869	1.7	1.35	5.09	2.29
Romania	0.080341	0.210645	5	0.38	4.02	1.91
Poland	0.287300	0.510966	3.2	0.56	9.19	1.80
China	5.135314	11.308000	3.6	0.45	184.87	1.63
Russia	0.200720	1.007000	7.8	0.20	15.66	1.55
Canada	0.897737	1.494537	2.2	0.60	19.75	1.32
Israel	0.208760	0.316312	1.9	0.66	3.97	1.25
New Zealand	0.081069	0.189594	2.9	0.43	2.35	1.24
Spain	1.209799	1.310179	1.3	0.92	15.73	1.20
Thailand	0.149019	0.376483	2.7	0.40	4.02	1.07
South Korea	0.578703	1.448000	2.65	0.40	15.34	1.06
UK	2.384000	2.931934	1.3	0.81	30.99	1.06
Hong Kong	0.132646	0.342770	2.3	0.39	3.05	0.89
Australia	0.427815	1.365377	2.67	0.31	11.42	0.84
Czech Republic	0.086566	0.235104	2.1	0.37	1.82	0.77
Belgium	0.559097	0.510423	0.7	1.10	3.91	0.77
France	2.667509	2.670660	0.7	1.00	18.67	0.70
Ireland	0.259160	0.338699	0.9	0.77	2.33	0.69
Norway	0.150770	0.440096	1.8	0.34	2.71	0.62
Austria	0.354133	0.422608	0.67	0.84	2.37	0.56
Finland	0.169888	0.268421	0.6	0.63	1.02	0.38
Slovakia	0.054638	0.101603	0.7	0.54	0.38	0.38
Netherlands	0.516300	0.799506	0.5	0.65	2.58	0.32
Switzerland	0.224266	0.668293	0.8	0.34	1.79	0.27
Germany	2.631044	3.999099	0.4	0.66	10.52	0.26
Sweden	0.208137	0.527576	0.5	0.39	1.04	0.20
Denmark	0.124396	0.339696	0.4	0.37	0.50	0.15
Japan	9.583917	3.815416	0.03	2.51	2.88	0.08

Notes: 1) Countries with GDP below $100 Bn excluded from data set. 2) Turkey figure is the 2 yr due to yield inversion.

There are four things people have more of than they know; sins, debt, years and foes.
old Persian proverb

The chart reveals that the people of Brazil, Greece, Pakistan and Turkey are the most stretched. Basically, out of their collective earnings a higher percentage is going to just pay the interest, let alone the principal. Some may be surprised to see the US 12th, this is based on a relative high 10 yr treasury bond. That is when compared to the 0.03% that Japanese 10 yr bonds yield!

Debt is the worst poverty.
Thomas Fuller, 17th Century English clergyman and author.

Al Jazeera

To keep the cost of borrowing this low the majority of the Eurozone are now paying negative rates on their 2 yr bonds thanks to Quantative Easing (QE)! Plus the gross debt figures themselves have been artificially reduced by the trick that is (QE), as liabilities become assets on a different balance sheet.

“A habit of debt is very injurious to the memory.”
-Austin O’Malley, American physician and author (disastrous marriage).

There is far too much focus on the size of the debt. How much you earn in relation to the debt is more important. The key question though is always affordability. For example, if Portugal's interest rate rose to 5% their service payments would rise to a painful 6.75%. Although the interest rates in the US would have to rise to 6% to feel the same pain. A rise to 4% for Singapore would be extremely tough. Meanwhile, Japan only needs to have interest rates rise to 2.5% to cause serious discomfort.

Source

We have had ten years of low interest rates, and they are now increasing again. If this continues it will make the debts more expensive. This will be paid for by the taxpaying citizens. This will be in a number of cost cutting measures and a general worsening of living standards for the majority.

Source

Thanks for reading, please upvote and resteem. Peace x