How Is National Debt Rated
Rating agencies score governments on a range of metrics. Countries with higher ratings can offer lower interest rates on their bonds because they are considered to be safe investments.
When investigating a countrys economy, the national debt is one metric that rating agencies note.
They also look at the debt-to-GDP ratio, the national debt per head of population, the interest rates on government debt, and the average bank lending rate.
Other Impacts Of Rising Interest Rates
When interest rates rise, the cost of mortgages on properties rise and so the cost of rents also rise. The increase in the cost of premises forces businesses to increase their prices in order to remain in profit.
This in turn increases the cost of living and causes inflation without economic growth. A workforce faced with an increased cost of living will demand higher wages.
This increases business costs and the price of goods, stoking inflation further. It doesnt help that companies tend to cut costs through employee salaries.
Eventually, businesses will be squeezed to the point of bankruptcy or move their production abroad to save their profitability.
When Was The Debt Clock Installed
Real estate investor Seymour Durst created the debt clock in 1989. At that time, the national debt was almost $3 trillion and 50% of the gross domestic product . It was initially installed on 42nd Street and Sixth Avenue in New York City. Durst is famously quoted as saying, If it bothers people, then it’s working.
Durst also bought front-page newspaper ads to further express his concern about the growing national debt. He conveyed a prophetic message in his 1991 message: “Federal debt soaring, national economy shrinking, soon the twain shall meet.”
The debt clock faithfully recorded the increasing U.S. debt until 2000. That’s when the prosperity of the 1990s created enough revenue to reduce the federal budget deficit and debt. It seemed as if the debt clock had accomplished its goal.
Unfortunately, that prosperity didnt last. The 2001 recession and the 9/11 terrorist attacks meant lower revenues and higher government spending, which added to the debt. The national debt exceeded $6 trillion by July 2002more than double what the national debt was when the clock was initially installed. The Durst Corporation reactivated the clock at that time. When the debt exceeded $10 trillion in September 2008, one more digit had to be added.
The national debt has grown by more than $18 trillion since the financial crisis in 2008. In 2020 alone, the national debt hit four new milestones. The table below highlights several national debt milestones from 2017 through 2021.
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Past: Debt Clock National Tour
In 2010, to highlight the crushing size of the national debt, we undertook a 1,500 mile tour of Britain featuring a 7metre long, lorry-mounted digital Debt Clock, ticking up as the Government borrows more and more money. The message to the nation’s politicians was: “Wake up to the National Debt!”
The custom-built clock was one metre high by seven metres long, and mounted on the back of a 14m lorry. Its 80cm , 14-digit red LED display counted up the nation’s debt at the breakneck speed of £5,169 per second that was, at the time, £446,575,342 per day.
Before the Debt Clock wed campaigned against the Governments dangerously high levels of borrowing with research showing that Brown planned to borrow double the debt needed to win World War 1.
Copyright TaxPayers’ Alliance. Some rights reserved.
National Debt Comparisons: Real
- World Debt Clock
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This guide explains what national debt is and what a countrys national debt figures represent. We explain what a debt-to-GDP ratio means and explore which countries have the highest and lowest national debt-to-GDP ratios in the world.
If you want to learn about the reasons why national debt occurs, head over to the section on the reasons for national debt. More, you can learn about why foreign investors buy the national debt of other nations.
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Why The Debt Clock Is Important
The U.S. national debt is the sum of all outstanding debt owed by the federal government. It’s an accumulation of each year’s budget deficits. About three-fourths of the national debt is public debt, which is held by individuals, businesses, and foreign governments that bought Treasury bills, notes, and bonds. The government owes the rest to itself, mainly to Social Security and other trust funds, and that’s known as intragovernmental holdings.
The debt clock shows how much the U.S. government owes its citizens, other countries, and itself. Most federal revenue comes from individual taxes. The government counts on you to pay the debt back one day. Corporations pass their tax costs through to you by raising prices. In other words, you, your children, and your grandchildren must pay 100% of the debt through higher taxes. The higher tax burden that the level of U.S. debt causes dampens expectations. It’s a big threat to the quality of life for future generations.
On Dec. 14, 2021, the debt ceiling was raised again. The increase of $2.5 trillion set the new limit around $31.4 trillion. This increase constituted the largest dollar amount increase of the national debt.
Debt To Gdp Ratio By Country 2022
What countries have the largest debt in the world? Here is a list of the top ten countries with the most national debt:
Japan, with its population of 127,185,332, has the highest national debt in the world at 234.18% of its GDP, followed by Greece at 181.78%. Japan’s national debt currently sits at ¥1,028 trillion . After the stock market crashed in Japan, the government bailed out banks and insurance companies and provided them with low-interest credit. Banking institutions had to be consolidated and nationalized after a period of time and other fiscal stimulus initiatives were used to help reboot the struggling economy. Unfortunately, these actions caused Japans debt level to skyrocket.
s national debt is currently 54.44% of its GDP, a significant increase from 2014 when the national debt was at 41.54% of Chinas GDP. Chinas national debt is currently over ¥38 trillion . An International Monetary Fund report from 2015 stated that Chinas debt is relatively low, and many economists have dismissed worries over the size of the debt both in its overall size and relative to Chinas GDP. China currently has the worlds largest economy and the largest population of 1,415,045,928 people.
s debt ratio is one of the lowest in the world at 19.48% of its GDP. Russia is the ninth least indebted country in the world. Russias debt is currently at a total of over 14 billion . Most of Russias external debt is private.
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How Are Debt Clocks Calculated
Well use the United Kingdom as an example:
1 We obtain the latest data regarding the countrys national debt and the 10-year average interest rate they pay on it, like:
National Debt: $1,717,879,000,000 10-Year Interest Rate: 2.50
2 Using these two figures we can then calculate how much the debt increases per year and subsequently per second.
Increase per Year: $42,946,975,000 Increase per Second: $1,362
3 We then work out the time difference between when the data was obtained and when the debt clock is being viewed by a visitor.
Time Difference = Time and Date of Visit Time and Date of Official Figure
4 The current debt is then calculated by adding the increase over this time to the official figure.
Current National Debt = Official Figure +
5 The debt clock then updates every two seconds, increasing according to the figures calculated in step 2.
Current National Debt = ) x Exchange Rate
Why Is National Debt A Problem
If a government increases its national debt to a level that the market thinks is too high, it will have to increase the interest it pay in order to find lenders.
With the backstop of a high return from a safe source, banks do not need to lend to businesses to make a profit. When banks are less interested in offering loans, they raise interest rates for all borrowers.
High interest on loans increases business costs and the return on investment that is funded on debt reduces. In this instance, businesses cease to expand and unemployment rises.
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Examples Of Capital Expenditure
Examples of infrastructure spending that improve an economy are:
- The development of transport infrastructure, such as motorways and railways
- Investment in universities to create more educational institutions or crate centers of excellence from existing establishments.
- Improvements in communication infrastructure, such as a fibre optic backbone to expand the nations internet bandwidth availability and speed.
If you are thinking of investing in a countrys economy, or if you are considering moving there, researching the national debt of that place and how the government spends money may be insightful.
A countrys national debt is one of many economic indicators that interplay to create a judgment on a countrys prospects for success.
The Us National Debt Clock Is Ticking Why People Are Now Paying Attention
- US national debt reaches $30.5tn in summer 2022
- Why the US national debt will never be paid back
- How USD remains globes main reserve and trading currency
The U.S. National Debt Clock doesnt track hours or minutes, but for many people it shows that the nation is running out of time. For others, not so much. The National Debt Clock display near Times Square in New York City registers government debt in real time, so the numbers are constantly flickering at the end of the 14-digit string, which currently shows a national debt of $30.5 trillion. Similarly, the U.S. debt clock website tracks debt in real time and breaks it down into debt per citizen and debt per taxpayer .
The purpose of these debt clocks is to make people aware of the size of the national debt and how quickly it is growing, but the question of debts and deficits is a vexed one open to interpretation.
When interest rates are quite low, as they have been since the 2008 financial crisis, people worry less about the size of the debt. Modern monetary theory, which gained some currency in recent years, says any country with its own fiat currency can issue debt virtually without limits.
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Why Do Governments Lower Interest Rates On Growing Economies
This knowledge in the financial community enables governments to lower the interest rates that it offers on its debt and reduce the cost of financing deficits.
Thanks to economic indicators, you can work out whether a countrys national debt will trigger a virtuous cycle of investment and expansion, or a destructive debt spiral.
Which Country Has The Most National Debt
According to the IMF, Japan is the most indebted country in the world in terms of a debt-to-GDP ratio.
To learn more about Japans economy and trade, see our Economic Overview Of Japan. We discuss top imports and exports along with GDP figures.
Debt-to-GDP is expressed as a percentage. GDP is a countys annual income and it is usually expected that the debt of a nation should be less than 100 percent of that GDP figure.
However, in many countries, the national debt is higher than the GDP.
Here are the ten most indebted nations in 2020:
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Which Countries Have The Lowest National Debt
Does national debt matter? Is it an indication of financial stability? Not always.
There is only one debt-free country as per the IMF database. For many countries, the unusually low national debt could be due to failing to report actual figures to the IMF.
Another instance where low national debt might be a bad sign is if a countrys economy is so underdeveloped that nobody would want to lend to them.
Here the ten least indebted nations in the world in 2020 as per the IMFs reported data:
|Congo, Dem. Rep. of the||16.1%|
Other Reasons For National Debt
Other obvious reasons for national debt are more mundane costs which occur as a result of culture and lifestyle.
For example, the healthcare costs in the United States have been rising for years and is one of the highest in the world.
Another reason for rising debt is the economic infrastructure we live in, which relies on productivity in individuals. As people live longer, more money is paid out in pensions.
The sustainability of such expenses largely depends on the countrys economic infrastructure, which in many cases, is lagging behind and adding to rising national debt-to-GDP ratios.
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How We Gather National Debt Data
Most of our data is directly obtained from official government agencies and central banks. When this is not possible, we use data from:
This raw data is then processed through our algorithms. Among other variables, these algorithms consider the average 10-year interest rate paid on the debt to calculate the current debt amount at the time you are viewing the debt clock.
We update our exchange rates using data from the European Central Bank.
Student Loan Debt Clock
Student Loan Debt Clock
This Student Loan Debt clock reports an estimate of current student loan debt outstanding, including both federal and private student loans. This student loan debt clock is intended for entertainment purposes only. The actual total debt outstanding demonstrates more volatility at the beginning of each semester, when most student loans are disbursed.
In June 2010, total student loan debt outstanding exceeded total credit card debt outstanding for the first time. The seasonally adjusted figure for revolving credit in the Federal Reserves G.19 current report was $826.5 billion in June 2010. Revolving credit started declining in September 2008 when it reached a peak of $975.7 billion. The decrease is probably due a combination of higher minimum payments on credit cards, which were increased to 4% from 2%, lower credit card limits and tighter credit underwriting. Student loan debt, on the other hand, as been growing steadily because need-based grants have not been keeping pace with increases in college costs. Federal student loan debt outstanding reached approximately $665 billion and private student loan debt reached approximately $168 billion in June 2010, for a total student loan debt outstanding of $833 billion. Total student loan debt is increasing at a rate of about $2,853.88 per second.
Practical tips for minimizing debt and reducing the cost of education financing include:
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The People Behind The Debt Clock
In fact, the Durst family, which operates the National Debt Clock, unplugged it in 2000 because it seemed to have fulfilled its purpose of alerting the public and policymakers to the importance of keeping debt down. The clock was stopped at $5.7 trillion but two years later it was plugged back in at $6.1 trillion.
Politicians, when it suits them, like to use the debt clock to scare voters. They use homespun metaphors about how we are maxing out our credit card and burdening our grandchildren, who, they say, will have to pay back all that debt.
That is not true. Nobody will ever pay back the U.S. national debt. What counts is what proportion of the national economy debt represents and what are the costs of servicing that debt.
Inflation can have a much more dramatic impact on public welfare. The landmark $550 billion infrastructure package passed in late 2021, for instance, has already sustained drastic cuts with 8.6 percent inflation forcing states to cancel projects as costs spike.
There are numerous theories about government debt crowding out private borrowers, pushing up interest rates, and dragging down the economy, but for the most part there is little historical evidence of this in the U.S. economy.
Much of the current $30 trillion-plus in debt is money budgeted for future expenditure, such as the Social Security trust fund. One academic economist has calculated that $8 trillion of the $30 trillion falls into that category.
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Why Does Larger National Debt Attract Bond Buyer
Having a large national debt doesnt always discourage buyers of bonds. For example, the United States has a debt to GDP ratio of 108% and a lot of people want to buy US Treasury bonds.
You can see this data summary of US Local & State Government Debt for more information.
Some countries, such as the USA are always considered a good place to invest, and the government bonds of those countries are always in high demand.
Do Foreign Countries Own National Debt
For example, Japan owns $1.276 trillions worth of US government debt.
The ten largest holding nations of US government debt as of September 2020 are shown in the table below:
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Evolution Of Canadas Debt
Contrary to Quebec and all the other provinces as well, there is no legislation restraining the federal governments indebtedness. The federal government is not required to run budget surpluses. The Finance Minister, however, is required to respect the Financial Administration Act, which currently sets a borrowing ceiling of $1.168 trillion this includes amounts borrowed by Crown corporations and Canadas mortgage bonds guaranteed by the Canada Mortgage and Housing Corporation. According to the Borrowing Authority Act, the Minister can borrow extra amounts under exceptional circumstances, with the approval of Parliament.
The debt is made up of government bonds held by individuals and financial institutions, mostly Canadian . However, debt is sometimes issued directly by the Bank of Canada in order to be able to quickly find needed funding in crisis situationsnotably in 2020 during the COVID-19 pandemic.
The gross debt is the sum of accrued liabilities and the interest-bearing debt, which comes from past deficits that had to be financed with loans as well as debts connected to retirement plans. It is called gross because it does not take into account the financial assets held by the federal government.
Subtracting these financial assets from the gross debt leaves the net debt.
The federal governments revenue comes mainly from personal and corporate income taxes, from the goods and services tax, and from contributions to social insurance plans.