Today almost everyone, who is interested in the world of finance, has heard that the national debt in America has reached some fantastic sizes, and Greece is about to leave the Eurozone, which has been happening for more than 2 years, and "all other countries envy them", as they say in a famous TV show. But we'll try to understand the depth of the crisis, diving into the whirlpool of debt problems of the countries, affecting the movement of the most popular currency pair EUR/USD.
The national debt: "how long does the sick man have to live?"
When they talk about the national debt, naming just huge numbers, one gets the feeling that this is the end, that the economy in the country can not function, and therefore the country is waiting for stagnation and in some cases "fiscal cliff" or "limited default"Or just an exit from the Eurozone, as in the case of Greece.
One of the most the right ways to in analyzing government debt is to compare or contrast it. For example, it is always effective and revealing to comparison with the level of GDP. Shall we look at the statistics?
In fact, the figures do not convey the fact that the value of the debts of individual Eurozone countries in relation to their levels of GDP is today the highest ever.
Moreover, it makes sense to look at the situation over time. This data will allow us to see "the patient's condition" and "how much time he has left to live.
Using the U.S. as an example, since 2000, the table (see Fig. 2) clearly shows Changes in the ratio of public debt to GDP.
Who in the Eurozone lives well?
For example, the amount of public debt in the Eurozone in 2011 was 2% higher than in 2010. At the same time it amounted to more than 87% of GDP. Indeed, Greece is not in a very good position today - more than 6 tranches of aid, of which the first were allocated for the recovery of the economy, and the last already to prevent complete bankruptcy. Greece's debt exceeded 165% of GDP. Among the problematic countries, the following are also mentioned Portugal and Ireland. And not coincidentally, their financial indicators are in very difficult conditions. We should not forget about other Eurozone countries, for example, Italy or Spain. They are also rocking the boat of the European Union, pointing at the reefs.
Again, everything is learned by comparison. In relative terms, Estonia has about 6% of national debt to GDP. That said, many would say: What about Germany?! This country has a really good rate of economic development, industrial indicators are good, business activity is above the stagnation level, but the national debt is just over 80% of GDP. Not weak? Maybe, but not fatally, because the economy is growing faster than the debt is accumulating.
And your ceiling collapsed!
Now let's talk about the U.S., which is not that "crazy," but the "ceiling" of public debt until March is definitely not.
The figure of 16.394 trillion U.S. dollars safely passed on New Year's Eve, and after much debate decided temporarily waive the upper barWe may not know all the hidden factors of the country's economy, but what is publicly available is not credible. We may not know all the hidden factors of the country's economy, but what is publicly available is not credible. Moreover, the statement by U.S. Treasury Secretary Timothy Geithner himself is frightening: "The U.S. could lose the ability to service its obligations as early as mid-February ... or early March. Currently, the Ministry of Finance is taking unprecedented measures to avoid a default".
Let's take a look at the government debt structure USA (according to Wikipedia):
As of February 14, 2013:
- The total national debt was $16,540 billion.
- Debt to private corporations and individuals - $11,684 billion (72 % of the total)
- Debt to foreign countries - $4,856 billion (28% of the total)
Let's compare the country to a company or a factory. So, when an enterprise has accumulated debts, it tries to work more efficiently by taking anti-crisis measures, reducing the cost of personnel, rent, and so on. And in some cases, they sell off part of the shops. The same happens with the countries: the cost of the machine is reduced, reducing the machine itself, and the same Greece was offered options to sell islands to pay off debts. There is also the ironclad option: find investorThe investor who is really interested in buying bonds and sees the prospects of investing money, or the investor who is just "used as a purse". Thus, imagine who is a ChinaThe government has invested a lot of money buying up the debts of Eurozone countries. That being said, Eurozone countries manage to sell their debts quite successfullyThe government has been offering tens of billions of dollars in government bonds.