By Matthew Yglesias, Vox
Unless you are dead inside, you love government debt data visualizations and this one from HowMuch.net is an excellent one, showing each country scaled to its debt-to-GDP ratio:
The basic idea of this ratio is that a bigger, richer country can probably afford to borrow more money than a smaller, poorer one. So rather than saying Jamaica is in good shape because it has such little debt but Brazil is a disaster, we see that Jamaica actually has a lot of debt relative to the size of its small economy, while Brazil has been quite frugal given its overall size and prosperity.
But to quibble for a moment, HowMuch.net characterizes this ratio as measuring the “unsustainability” of government debt levels.
That’s wrong, I think.
Some of these countries — the United States, Japan, the UK — owe money that is denominated in their own currency. The Japanese state isn’t going to run out of yen no matter what happens, and given Japanese inflation trends over the past 20 years that country not going to find it problematic to print a bunch of yen if that’s what needs to be done.
A country with a lot of foreign currency debts (looking at you again, Jamaica) has a much more tenuous position that is much more analogous to a heavily indebted family or business.
Then there’s the middle-ground case of the eurozone countries. Greece, Italy, Portugal, etc. don’t issue their own currency, but they also don’t borrow money in someone else‘s currency. The eurozone could, collectively, manage these debts fairly easily. But thus far it hasn’t wanted to, which makes eurozone debt riskier than it needs to be.
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