Common Sense Comes to Town!

Common sense is the most fairly distributed thing in the world, for each one thinks he is so well-endowed with it that even those who are hardest to satisfy in all other matters are not in the habit of desiring more of it than they already have. (Descartes)

You Are in Debt

Posted on | October 7, 2010 | No Comments

That is a surprising title, especially if you pay all your expenses cash on the nail and carefully avoid credit or debts of any kind. But I’m sorry to bring this bad news to you: you – are – in debt. At the very least, you carry a burden of approximately 6 000$. This, no matter the country you live in, your age, gender, and so on.

This rather harsh claim rests on a gross over-simplification of a worrisome truth: world public debt (including all levels of government) has risen to nearly 40 000 billion US dollars, pretty close to 6 000$ per person. This does not factor in debts of individual (credit cards and mortgages) and private businesses.

Obviously, the debt load isn’t evenly spread amongst the world’s inhabitants. Thus, Canada, with a total public debt of 1,251 billion dollars (36 893$ per capita) is in way deeper than Malawi, with a debt load of 2 billion dollars (125$ per capita). On the other hand, debt is also measured according to your capacity to pay it back. Canadian debt represent 82,4% of its GDP. Malawi’s debt accounts for 40,5%, which is a frightening proportion of its income for such a small amount. In comparison, Sweden’s debt – 158 billion – represents 38,8% of its GDP.

This data comes from a very useful page published online by The Economist which calculates in real time the progress of the world’s debt. It allows us to see how it progress in each individual country, year after year. We can also make interesting comparisons between countries. Thus, France’s debt also represents 82% of its GDP, but this represents a lesser debt per person. We can thus compare the GDP per capita for both countries.

For countries with a steady income base, this debt level isn’t a problem. For others such as Malawi, there can be troubles ahead. The debt level prevents any possibility to borrow and improve public infrastructures, and further economic growth. A vicious circle is created.

The guide published by The Economist isn’t to be taken lightly, but can be the starting point for a deeper inquiry on the economic condition in various parts of the world.

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