Where do the world's debts come from and how many trillions do the countries of the world owe?

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

For the first time in the history of market civilization, the problem of debts has affected almost all countries and the entire world economy, which was a consequence of the world economic crisis of 2007-2009. This becomes clear if you look at the statistics of debtor countries, where a significant share of external loans, mainly from a group of countries with developed economies. And the leading position here is occupied by the United States, paradoxically.

The question arises - how long will the economies of these countries increase the debt ceiling and how will the new loans be secured? It is precisely with the widespread use of interest-bearing credit in the capitalist economy that such a phenomenon as an economic crisis, a crisis of overproduction, is associated.

Although, more recently, many Western countries have reduced interest rates on loans below 1%, otherwise with the huge debt that each country has, this creates great risks for the economy.

The global economic crisis also affects countries in emerging markets, which are forced to take measures to secure their economies. But this large group of countries also has external debts, although not as huge as those of advanced economies, which also negatively affects the world economy.

The main question arises - who owes all countries and what is the alternative to the existing financial system? It is this problem of a global scale that our article will be devoted to.

Terminology and certain concepts that should not be combined into one - public debt

National debt of the country(public dept) refers to the financial loans of the government of the country to pay off the budget deficit.

Public debt is calculated in the national currency of a country or in US dollars, but for greater clarity, it is displayed as a percentage of borrowing from the country's GDP (i.e.,% of the size of the economy - Table 1). Public debt should not be confused with external debt.

Government debts today mainly exist in the form of bonds in the domestic and foreign markets, and private - in the form of bank loans (commercial, mortgage, consumer, etc.).

External debt- is defined as the amount of public and private debt to be repaid by non-residents in foreign currency, goods or services (Table 1).

And it is he who shows the total debt burden on the country's economy.

The presence of a significant external debt in foreign currency is regarded as a serious threat to the stability of the national currency and the entire national economy. This clearly indicates that part of the national wealth belongs to foreigners.

Gold reserves(international reserves or official reserves) - external highly liquid assets, presented in the form of foreign currency and gold, which are under the control of state monetary authorities and at any time can be used to finance the balance of payments deficit, for interventions in foreign exchange markets, providing influence on the exchange rate of the national currency, or for similar purposes (Table 1).

Distribution statistics by country - external debt, public debt, inflation and assets (reserves)

Table 1 (empty cells - no data)

Country External Debt (in USD) Reserves (in USD)

Inflation in%

(CIA Handbook 2017)

Our table contains more than two hundred countries, so for convenience, let's divide them into two groups - developed and developing.

This must be done in order to highlight their aggregate share by the indicators given in Table 1 for 2017 and compare them. But first, let's list these countries by group.

Advanced economies (41):

Europe and the Middle East - Austria, Belgium, Great Britain, Germany, Greece, Denmark, Israel, Ireland, Iceland, Spain, Italy, Cyprus, Latvia, Luxembourg, Malta, Netherlands, Norway, Portugal, San Marino, Slovakia, Slovenia, Finland, France, Czech Republic, Switzerland, Sweden, Estonia, Liechtenstein, Monaco, Vatican and Faroe Islands;

Australia, Oceania and the Far East - Australia, Hong Kong, New Zealand, Singapore, Taiwan, South Korea and Japan;

North America - Canada, USA and Bermuda;

Emerging economies (153):

Europe - Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Hungary, Kosovo, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Turkey;

CIS - Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan;

Asia - Bangladesh, Bhutan, Brunei, Cambodia, China, Fiji, India, Indonesia, Kiribati, Laos, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, East Timor, Tonga, Tuvalu, Vanuatu, Vietnam;

Latin America and the Caribbean - Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, Venezuela;

Middle East, North Africa - Afghanistan, Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Pakistan, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, UAE, Yemen;

Tropical africa - Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Republic of Congo, Cote d'Ivoire, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, South Africa, South Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, Zimbabwe.

This classification is presented by the IMF and includes 188 countries plus six countries that are not part of this organization - Andora, Bermuda, Faroe Islands, Liechtenstein, Vatican and Monaco. These countries belong to developed economies and are represented by the World Bank (WB).

Assessment of indicators from Table 1

In 2017, the external debt of all countries amounted to 106,554,860,470,418 dollars. Advanced economies accounted for $ 68,221,197,600,000 or 64% of total debt.

External debt leaders in this group, the European Union - $ 29.2 trillion, the USA - $ 17.9 trillion, and the UK - $ 8.1 trillion, respectively. The external debt of countries with emerging economies amounted to 38.333.662.870.418 dollars or 35.9% of the total debt.

If we consider that there are only 41 countries with developed economies, and 153 with developing economies, then the total external debt of 68.2 trillion dollars is very large.

External debts clearly show - which countries are producers of goods and which are only consumers.

In 2017, gold and foreign exchange reserves (hereinafter - gold reserves) of all countries amounted to 12,010,975,361.803 dollars.

If this indicator is compared with the external debts of all countries, then it is much less - only 11, 2% and cannot fully cover the entire amount of debts. The countries with developed economies accounted for 4,719,843,416,946 dollars of gold and foreign exchange reserves. The rest of the group of countries already has $ 7,291,131,944,857 gold reserves.

In terms of the size of the public debt, countries were formed in which it significantly exceeded 100% of GDP. In the group of advanced economies in 2017, Japan, Greece and Italy were in the lead.

Japan's public debt was 236.4% of GDP, Greece's 181.9%, and Italy's 131.5%, respectively. In the group of countries with developing economies on this indicator, the leaders were such countries as Lebanon - 152.8% of GDP, Yemen - 135.5% and Barbados - 132.9%, respectively.

In most advanced economies, public debt either approached 100% or already exceeded this mark. For public debt, the value of 60%, voiced in the Maastricht Agreements, is considered critical, but even countries with developing economies have surpassed this mark.

Inflation rates in the group of advanced economies are quite low. Iceland has the highest rate in this group - 4.1%. The second group of countries has significantly higher inflation rates.

Venezuela was in the lead - 2200.02%, Yemen - 21.04% and Argentina - 20%. This factor suggests that there is too much money in circulation in the state, as a result of which it depreciates. And this, in turn, inevitably leads to higher prices.

This statistics of distribution by country for 2017 has changed for almost all indicators. Unfortunately, every year in a big way, which negatively affected the world financial system - the world economy.

And since many countries - not only developed, but also developing ones - are tied to the world market, where all payments are made in dollars and euros, these countries are not immune from the risks associated with the global economic crisis.

And, if the total world debt is growing rapidly, then the world crisis is developing permanently.

There is also such a concept as the structure of world debt, which includes the debts of governments, corporations, banks and households of all countries combined. The total debt of all countries needs to be weighed against world GDP.

By this indicator, you can understand how much unsecured money in the world

economy and in what currency. Let's take a look at the diagram below.

In the diagram, we see the dynamics of quantitative indicators for the year. Largest corporate and government borrowings in 2017. The dynamics of debt growth shows the same.

Under this scheme, the world debt in 2017 amounted to $ 222.6 trillion … This amount exceeds the world GDP - $ 70 trillion by 3.18 times.

This means that $ 152.6 trillion in the world economy is unsecured money. The fact that an unsecured amount of money equal to more than two world GDP is in circulation means at least the following.

First: those with a printing press cleverly redistribute huge flows of various raw materials and products in their favor.

That is, using the advantage of the reserve currency, they actually withdraw part of the world GDP, which was created by other market participants. Here it should be borne in mind that the level of US consumption, according to various estimates, is about 40% of world GDP.

And if we take into account that almost all of the manufacturing industry has been exported to China, Vietnam and other countries, then the share of their production in world GDP is incomparably less than 40%.

And the second: the overwhelming majority of world capital is speculative in nature and is not invested in real production, but mainly in exchange instruments.

If we take the external debts of only developed countries - $ 68.2 trillion, then they are almost equal to the world GDP.

That is, this group of countries has not yet produced anything, but has already received net investment in its own economy in an amount equivalent to world GDP. As for the countries of emerging markets, which also have debts, they want to ensure themselves the same level of consumption as in economically developed countries.

But, with a dominant culture, this tendency is detrimental to nature and civilization as a whole.

On the causes of the global financial crisis

The world economic crisis is a characteristic phenomenon for a market economy, recurring at regular intervals and affecting more than one state.

The world economic crisis is a phenomenon characterized by a sharp deterioration in absolutely all financial indicators. This state of the economic sector rocked the world in 2008.

One of the key causes of the global crisis is the dominant economic model of financial capitalism. Within this model, the following happens:

• failed financial regulation that was ineffective and imperfect;
• mistakes in corporate governance leading to excessive risks;
• oversaturation of the credit market;
• artificial understatement of energy prices;
• disharmony in international trade;
• The United States and other issuers of reserve currencies, to maintain the achieved standard of living, print (issue) colossal volumes of currencies that are absolutely not backed by anything;
• unlimited issuance of mortgages in the United States and lack of control over this process;
• stock market bubbles, securities, unnecessarily expensive real estate, wood-based materials;
• infusion of the dollar into the economies of other states forced to use foreign currencies (inflation export);
• emerging markets are phasing out the dollar;
• the growth of external debt obligations of countries, companies and the entire population mired in loans (household debt in the United States and other Western countries has reached record levels).

The main reason for the economic destabilization that occurred in 2008 is the overproduction of the US dollar. In addition to the above main reasons for the global economic crisis, there are also accompanying factors.

They have a catalytic effect, that is, they further aggravate the existing situation in the world. These are the increasing world debt and the associated huge gap with world GDP, irregularities and inconsistencies in international trade and capital flows, and the instability of the American currency.

Many borrowers are simply not able to repay the colossal debts created in the global financial system within the agreed time frame. The states will not be able to generate the corresponding financial flows without catastrophic damage to their economies.

Today, most debts are simply refinanced - some are closed and instead of them, others are immediately opened, often much larger.

But lenders today are quite comfortable with the borrower's long-term ability to pay interest. In fact, urgent debts are turning into indefinite ones before our eyes, and borrowed funds in the system begin to play the role of subordinated equity capital.

However, this situation is extremely unstable and is fraught with the emergence of serious crises, which occur within the framework of the existing economic model.

The main question is - To whom do countries owe?

“The money elite parasitize the country in peacetime and weave conspiracies against it in times of disaster. The Power of Money is more despotic than monarchy, more arrogant than autocracy and more selfish than bureaucracy.

She condemns as "enemies of the people" all those who question her methods or shed light on her crimes. I have two main opponents - the southern army in front of me and the bankers behind me. Of these two, the one behind is my worst enemy."

President of the United States, Abraham Lincoln

As you noticed, world statistics on the main indicators of countries for 2017 are available in open sources.

These statistics are based on materials from the CIA Handbook, with the exception of inflation figures, which we obtained from the IMF. But you will not find statistics on creditors anywhere, that is, a specific international bank and the number of loans issued to a specific country … No matter how much we searched, we did not find it.

I wonder where this strange information asymmetry comes from? Another oddity is caused by an explanation on the CIA website, where these statistics are presented.

It states that the total amount of external public debt of all countries of the world is more than 70.600.000 million US dollars. And further below it is explained that the liabilities of non-residents to residents of a given country have not been deducted from the amount of external debt presented in the table.

The question is - why are they not deducted, but indicated in trillion dollars? The total amount of external debts, which is indicated on this site as it was - 70.6 million dollars, has not changed for several years, although the debt obligations of the countries are constantly growing.

But we are concerned with the main question - to whom do the countries owe?

In the table presented, the liabilities of non-residents to residents in the form of the amount of external debt are not taken into account, because their creditors are not states, but influential banking corporations - "owners of money" who do not prefer to shine. IMF, WB, FRS, EBRD, BIS - these are the signs behind which these "owners" stand.

All decisions are made behind the scenes, and the chairmen of these international financial organizations are simply voiced.

There is an end and there is a means.

Target - This is the absolute power that money gives in a capitalist society, above all, over the society itself and the state in which this society lives.

A facilities - these are large banking corporations, monetary policy with lending interest and, finally, money itself. National banks, on the other hand, are ordinary usurious offices that are inscribed in the global banking network and function as elements of a single system.

The IMF gives loans to countries at low rates, but under certain obligations. They are not interested in how these funds will be spent, the main thing is that all clauses of obligations are fulfilled.

Their essence boils down to significant political concessions that directly affect the sovereignty of the state. The conditions for the development of the country - its industries, social sphere, government programs, business, etc. are discussed separately. This was the case with Greece, Iceland, once with Russia, now with Ukraine.

The FRS through its branches - Central banks determines the monetary policy of a particular state, the rate of the national currency, even the amount of gold and foreign exchange reserves. At the moment, there are about 200 Central Banks in the world.

And there is an international hierarchy of Central Banks with their status, within which they clearly follow a certain line.

There are only four states in the world that do not have a Central Bank - these are Cuba, North Korea, Iran and Syria … There are national banks that pursue sovereign financial and economic policies. Russia needs just such a bank today.

What is the alternative to the existing financial system?

The current world financial system is based on the use of the dollar as the main, and in fact, the only world reserve currency.

The foundations of the system were laid in 1944 with the formation of the Bretton Woods system and the creation of the International Monetary Fund (IMF).

With the abandonment in 1971 of the convertibility of the dollar into gold, the system acquired its modern shape.

The United States, relying on its monetary and economic potential and gold reserves, equated the dollar with gold, securing its status as the main reserve currency. When the system was created, it was declared that it should ensure a balanced development of the world economy through the use of controlled floating exchange rates.

As a result, in fact, it led to huge imbalances in world trade, an increase in the money supply and an increase in financial risks.

The redistribution of positions between countries in our time is a reflection of an important feature of modern economic development, competition in the world market.

The exponential growth of imbalances in the world economy began in the 90s, when the created system increasingly began to provide mainly only the growing needs of the US economy. The United States used the status of the dollar as a reserve currency to cover its balance of payments deficit with the national currency.

The annual deficit of the US foreign trade balance from several tens of billions of dollars in the 80s eventually increased to 500-700 billion dollars. This is the additional volume of goods and services that the United States receives annually in exchange for dollars.

Thus, the United States used the results of other people's labor through the import of goods at the expense of the export of its dollars.

The founders of the Bretton Woods monetary system believed that foreign exchange interventions aimed at maintaining a parity exchange rate would provide the developed currency agreements with the opportunity to self-adapt to changes in economic conditions, as provided by the gold standard.

However, the unequal monetary mechanism contributed to the strengthening of the United States' position in the world to the detriment of other countries and international cooperation. The Bretton Woods system was unable to provide relatively long-term stability in exchange rates.

Against this background, we are seeing strong volatility in currencies. Undervaluation of the exchange rate is a relatively painless and simple policy technique designed to increase the competitiveness of their goods and services in international markets.

Other ways to improve the economy, such as structural reforms, are much more difficult to implement.

The United States, taking advantage of the reserve status of its national currency, has long been printing as many dollars as it needs to finance growing budget spending.

An important feature of the modern financial system is that its instruments have ceased to be supported by a material base, but have become only an electronic record on accounts. This is inherent in the US dollar, securities, derivatives, domestic and foreign debt.

It is obvious that such a financial system based on the dollar, with the absolute dominance of the United States in the world, is unstable and fraught with collapse. It's only a matter of time, but some kind of alternative is needed.

Settlements in national currencies

The start of the launch of such an alternative can be settlements between countries in national currencies. At the moment, interstate payments in national currencies are carried out by Russia, China, Belarus, Ukraine, Iran, the United Arab Emirates and a number of other countries.

General and inter-civilizational financial infrastructures

To ensure settlements in national currencies, first of all, an appropriate settlement infrastructure is required. And such an infrastructure is being actively created. In addition to China, Russia uses national currencies in trade with a number of CIS countries.

Gold

It is also necessary to increase the share of gold in gold and foreign exchange reserves, not dollars. Gold is the only monetary asset in the world that does not have the risks inherent in currencies, and is the only globally recognized asset that is not tied to any particular state, and, therefore, in critical cases, including those related to sanctions, it can be used for settlements with other countries.

Gold still remains an important component of the material and financial basis of the economies of many countries of the world.

It should be borne in mind that gold is a competitor to the dollar. And the bulk of the gold reserves in gold is accounted for by developed countries. The US is using it to strengthen its reserve currency, the dollar. As you know, Russia is also increasing the share of gold in the gold reserves, which is also no coincidence.

Energy standard - a bold step forward

The energy standard for the security of banknotes can be an absolute alternative. Read more about this in the article “Towards an energy standard through gold”.

In economics, there is a concept - an invariant of the price list, which can serve as the basis for a new financial system. Today, the role of such an invariant is played by the US dollar.

At the same time, the modern credit and financial system is not provided with anything. An invariant price list based on the energy standard can ensure the stability of the global financial system for a long period of time. At the same time, all national currencies in mutual settlements will have a stable exchange rate, which means they will no longer depend on reserve currencies.

If a state announces that it is introducing an energy standard for the security of its national currency and from now on it sells all products and raw materials only for it, but not because it wants to, but in order to protect markets and its national currency, then this state will automatically become a competitive economy.

And crises will become a completely understandable phenomenon in world practice. Other states that will be interested in pursuing their own economies will simply follow the example of such a state.

Price list invariant is a product that participates in the exchange of products along with other products, the quantity of which is used to calculate the prices of all other products without exception. The price of the invariant itself is always unchanged and equal to 1, which gave the name to the term.

In the past, the invariant of the price list also served as an intermediary product in the two-way scheme "T1 → D → T2", that is, the function of the invariant and the function of being a means of payment were merged together.

Now there is no need for this, since after the spread of "credit money" and various "monetary surrogates" that do not have any intrinsic value, the functions of the invariant and the means of payment were divided and ceased to be connected.

Means of payment have become a pseudo-invariant, so money in our time is what society perceives as money.

Therefore, today the price list invariant can only fulfill its direct role - or the first function of money - to be a measure of the prices of all other products.

State banks instead of private offices

Today we need a different credit and financial policy. But it can be different in a sovereign state with a national bank, the purpose of which will be the restoration and development of production, as a single system, and not the profit of the bankers.

Conclusion

The market economy with its commandments must be recognized as ineffective and does not meet the modern challenges of the time. It should be replaced by the economy of innovative development. We need to understand that the world around us will not change if we do not change ourselves. And above all, in their own views of the world around us.