445% Debt To GDP - Is Math Broken?
Hey Jesseconomists
I recently read an article stating that the world now requires $103 Trillion of new credit to function, while the see numbers may seem like random statements since we've become so desensitised to the idea of a billion and a trillion. Soon we won't even flinch at the idea of Quintilian I'd like to try and put it into perspective for you.
Current world debt sits around $258 trillion, so adding another 103 would take is up to $361 Trillion. When you consider the fact that Global GDP is only 81 Trillion per year, that would mean we'll be moving up form a 331% debt to GDP ratio to 445%.
I read some study I can't remember where I know Lyn Alden quoted it in a podcast recently on What Bitcoin Did, I think, and she mentioned that no countries fiat currency has survived after hitting 130% Debt to GDP, yes it took time to die even when it hit those rations, however, there was no coming back, is the main point.
Who is at a tipping point
If we take a look at the countries that have borrowed over their eyeballs and way beyond it paints quite the startling picture, as its a mix of nations from developed to developing and apart from the US non of them can create their own currency without borrowing USD and selling bonds.
I'm not exactly sure where this data comes from as the site doesn't provide sources, I've linked to it below the table, but this is what I could find on debt to GDP of countries.
I have to assume its total debt of the country including household, corporate and government since this Wikipedia article on government debt to GDP tells another story.
| Country | Debt | % of GDP | Per Capita |
|---|---|---|---|
| Malta | 96.25 Bn | 879.00% | 223,000 |
| Cyprus | 119.67 Bn | 597.00% | 97,200 |
| Singapore | 1.32 Tn | 453.00% | 231,000 |
| United Kingdom | 8.48 Tn | 313.00% | 127,000 |
| Switzerland | 1.82 Tn | 269.00% | 213,100 |
| Belgium | 1.28 Tn | 265.00% | 112,000 |
| Monaco | 16.50 Bn | 240.00% | 434,000 |
| Greece | 477.00 Bn | 228.00% | 42,800 |
| Portugal | 447.02 Bn | 216.00% | 43,300 |
| France | 5.69 Tn | 213.00% | 87,200 |
| Finland | 483.37 Bn | 196.00% | 87,500 |
| Bahamas | 17.56 Bn | 194.00% | 44,200 |
| Mongolia | 25.21 Bn | 186.00% | 7,800 |
| Seychelles | 2.55 Bn | 180.00% | 26,200 |
| Sweden | 993.94 Bn | 177.00% | 94,500 |
| Norway | 604.42 Bn | 169.00% | 117,000 |
| Austria | 638.34 Bn | 167.00% | 73,100 |
| Spain | 2.26 Tn | 167.00% | 48,700 |
| Puerto Rico | 167.40 Bn | 164.00% | 47,800 |
| Denmark | 491.62 Bn | 163.00% | 85,700 |
| Latvia | 41.15 Bn | 147.00% | 21,200 |
| Germany | 5.40 Tn | 141.00% | 65,600 |
| Australia | 1.49 Tn | 126.00% | 60,800 |
| Italy | 2.51 Tn | 124.00% | 42,300 |
| Jamaica | 16.76 Bn | 122.00% | 6,000 |
Stats according to: worldpopulationreview.com
We're pushing the limits
Since I've never lived through hyperinflation myself I can only read up about it and assume that things could turn out similar, but I mean if these numbers are correct then this system of money we have is pretty robust, you can seriously abuse it, and it will keep going.
Yes there's an insane wealth divide, and so many left poor, resources are misused and all that I normally complain about but damn, you really have to take your hat off to the fact that as far as we pushed this thing, it just keeps on chucking along without breaking.
A part of me thinks that it's more psychological than it is mathematical and peoples blind faith in the system and belief in fiat keeps this game of hot potato and musical chairs going. No developed nation thinks they are going to turn into a failed state; there's plenty of states that need to fail first before it gets there.
Who will be first to chicken out
However, 2020 has sure as shit sped up that process and we're going to see states fail, default, or hyperinflate their currencies in the next 10 years. In the game of debt, there are winners and losers, and while I don't know who is the worst bag holder, someone is going to be stuck with the bags in this pump and dump.
Even if countries do deleverage debt and move to a CBDC, they'll be sitting with so many currency units that are unproductive that inflation on the supply of goods and services is inevitable.
At this point, I think we will have to look at scarce assets like Gold, Silver and Bitcoin to be the truth and the price signals we base everything on. Fiat isn't going anywhere anytime soon, but it sure is going to be in some state of flux and who knows what each national currency will do, if they will die and how much-compounded value they will lose over the next 10 years.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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The dollar still remains a global reserve currency and that's one factor that has prevented massive devaluation of the currency.
However, the world is getting to a point where more debt will be needed to service existing debt. That's a point of no return.
I believe that no big government will default on debt. However, most governments will try to inflate their way out of debt. That's invisible taxation for the common man.
Further, interest rates are at historic lows. As inflation accelerates and interest rates trend higher, debt servicing cost will surge.
Therefore, we are in the inescapable debt trap. It remains to be seen when a financial crisis bigger than the financial crisis of 2008-09 hits us.
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Yeah USD is holding up in relative terms, unfortunately, I don't get paid in dollars lol, I have to live with South African rands that do far less each year, and the effects are compounding.
Technically yes no government should default, but if they're not getting support from the IMF there's no change, Argentina is a prime example. Unless you're cosy with the issuers you're not getting the support you need.
It is indeed a debt trap, I look at these numbers and I try to apply it to myself like what if I was 445% in debt, I'd wonder how I was even allowed to keep borrowing but then again country should last many life times versus a person.
I don't know, I just think if it was all math-based and not faith-based and the fact that we're all systematically tied to it, it would have fallen apart by now
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This make believe Finance is getting scary, maybe the typical consumer is still hoping things just keep going and living in denial or trusts that the govt will bail things out.
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I've been trying to learn more about it to make sense of it but from what I learn it should be breaking down more than it already is, so I feel like I'm misunderstanding a lot of it, or man faith in this entire thing is just too strong for good old fundamentals, I'm still trying to figure out which is which.
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The situation is absolutely insane. Future historicians will wonder and speculate how it could come to this situation, and why there where almost no serious attempts to come out of this, despite the fact that all data was available. Lack of alternative - but than a technical alternative was found...
I also think this is the biggest experiment we've ever had and it's all going wrong and failing most of society, I do hope we document it and learn from it. I agree we don't have an alternative, even blockchain as promising as it is is nowhere near ready to handle the globes transactional needs.
But it's a start, I do think more MMT style policies are coming because it's at a point of no return and we sort of need all the time we can get until we have a real alternative
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Sometimes I think we just need a global economic reset!
I think those figures for the UK are wrong - our debt isn't $8 trillion - that would been around $150 000 per adult, I thought it was nearer $ 2 trillion.
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I wonder if it will ever come, people have been talking about it for a long time now, and does a reset even help if we just go back to doing the same thing only for it to implode all over again
Lol yeah, I wasn't too sure on the accuracy of these numbers or the source, but I can assume the overall trend is pretty shit. If you're in 8 trillion or 2 trillion debt and you can't pay it back, what's actually the real difference?
The numbers are getting so big, I don't see how this can go on for too much longer. What's a few trillion amongst friends?
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Lol well if they want to kick a few trillion my way I'll take it, or they can kick a few trillion into LEO and I'll take my share lol
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$6 trillion!
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If that's the market cap of BTC, then I'm rich AF, and can chill my ass off and just HIVE and i don't know do whatever I want lol
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I think we are getting close to a reset, things can go on longer than we think, but it will happen I'm pretty sure of it and am getting prepaired for it.
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Oh I by no means want it to collapse, I'm pretty much tied to it, I need more time to deleverage into crypto and acquire a boat ton more sats before I could feel comfortable with a reset
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Those previous episodes that broke at 130% always had a better currency available to switch to. In today's world, all the fiat currencies are in the same position. So until people really start using crypto as at least a store of value, this game can continue.
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I sort of get that gives you a bit more breathing room when you comparing floating currencies, but surly it gets to a point where faith is lost. For example here, in nominal terms, the price bread has gone up by over 1000% so eventually people have to jump ship or they fall below the poverty line making them the governments problem printing more money pushing more below poverty
How far can we honestly shift the numbers, especially when wages aren't keeping up, if labour was paid at the rate of inflation I think it would be a little easier to manage
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That's true, but you have to look at the global game. So bread goes up 10x in your currency. Are people saying "we should use bitcoin" or "we should use dollars/euros?"
As long there are those fiat alternatives that are kind-of-ok for people, they will go for that.
When those global currencies like the dollar and the euro lose faith, then it's global reset time.
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