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$63 Trillion of World Debt in One Visualization

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$63 Trillion of World Debt in One Visualization

$63 Trillion of World Debt in One Visualization

If you add up all the money that national governments have borrowed, it tallies to a hefty $63 trillion.

In an ideal situation, governments are just borrowing this money to cover short-term budget deficits or to finance mission critical projects. However, around the globe, countries have taken to the idea of running constant deficits as the normal course of business, and too much accumulation of debt is not healthy for countries or the global economy as a whole.

The U.S. is a prime example of “debt creep” – the country hasn’t posted an annual budget surplus since 2001, when the federal debt was only $6.9 trillion (54% of GDP). Fast forward to today, and the debt has ballooned to roughly $20 trillion (107% of GDP), which is equal to 31.8% of the world’s sovereign debt nominally.

The World Debt Leaderboard

In today’s infographic, we look at two major measures: (1) Share of global debt as a percentage, and (2) Debt-to-GDP.

Let’s look at the top five “leaders” in each category, starting with share of global debt on a nominal basis:

RankCountriesDebt ($B)% of Global DebtDebt-to-GDP
#1United States$19,94731.8%107.1%
#2Japan$11,81318.8%239.3%
#3China$4,9767.9%44.3%
#4Italy$2,4543.9%132.6%
#5France$2,3753.8%96.3%

Together, just these five countries together hold 66% of the world’s debt in nominal terms – good for a total of $41.6 trillion.

Next, here’s the top five for Debt-to-GDP:

RankCountryDebt ($B)% of Global DebtDebt-to-GDP
#1Japan$11,81318.8%239.3%
#2Greece$3530.6%181.6%
#3Lebanon$750.1%148.7%
#4Italy$2,4543.9%132.6%
#5Portugal$2670.4%130.3%

While only Italy and Japan here are considered major economies on a global scale, the high debt levels of countries like Greece or Portugal are also important to monitor.

In the IMF’s baseline scenario, Greece’s government debt will reach 275% of its GDP by 2060, when its financing needs will represent 62% of GDP.

A recent IMF report, obtained by Bloomberg

Greece, for example, is continuing along a particularly unsustainable path – and external creditors are getting stingier. Most recently, both the IMF and Greece’s euro-area creditors have demanded for the country to implement a law that automatically introduces austerity measures if a budget surplus of 3.5% of GDP isn’t hit.

While Greece has dismissed such demands as “unacceptable”, the country – along with many others around the globe – will have to accept that constant debt accumulation has eventual consequences.

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Central Banks

The Anatomy of the $2 Trillion COVID-19 Stimulus Bill

A visual breakdown of the CARES Act, the $2 trillion package to provide COVID-19 economic relief. It’s the largest stimulus bill in modern history.

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The Anatomy of the $2 Trillion COVID-19 Stimulus Bill

The unprecedented response to the COVID-19 pandemic has prioritized keeping people apart to slow the spread of the virus. While measures such as business closures and travel restrictions are effective at fighting a pandemic, they also have a dramatic impact on the economy.

To help right the ship, the Coronavirus Aid, Relief, and Economic Security Act — also known as the CARES Act — was passed by U.S. lawmakers last week with little fanfare. The act became the largest economic stimulus bill in modern history, more than doubling the stimulus act passed in 2009 during the Financial Crisis.

Today’s Sankey diagram is a visual representation of where the $2 trillion will be spent. Broadly speaking, there are five components to the COVID-19 stimulus bill:

CategoryTotal AmountShare of the Package
Individuals / Families$603.7 billion30%
Big Business$500.0 billion25%
Small Business$377.0 billion19%
State and Local Government$340.0 billion17%
Public Services$179.5 billion9%

Although the COVID-19 stimulus bill is incredibly complex, here are some of the most important parts to be aware of.

Funds for Individuals

Amount: $603.7 billion – 30% of total CARES Act

In order to stimulate the sputtering economy quickly, the U.S. government will deploy “helicopter money” — direct cash payments to individuals and families.

The centerpiece of this plan is a $1,200 direct payment for those earning up to $75,000 per year. For higher earners, payment amounts will phase out, ending altogether at the $99,000 income level. Families will also receive $500 per child.

There are three other key things to know about this portion of the stimulus funds:

  1. There will be a temporary suspension for any student loan held by the federal government. This means no payments required and no interest accrued until the end of September, 2020.
  2. Borrowers with federally backed loans can request forbearance on mortgage payments for up to six months.
  3. There will be an expansion of unemployment benefits, including a four-month enhancement of benefits. This plan includes freelancers, workers in the gig economy, and furloughed employees.

Big Business

Amount: $500.0 billion – 25% of total CARES Act

This component of the package is aimed at stabilizing big businesses in hard-hit sectors.

The most obvious industry to receive support will be the airlines. About $58 billion has been earmarked for commercial and cargo airlines, as well as airline contractors. Perhaps in response to recent criticism of the industry, companies receiving stimulus money will be barred from engaging in stock buybacks for the term of the loan plus one year.

One interesting pathway highlighted by today’s Sankey diagram is the $17 billion allocated to “maintaining national security”. While this provision doesn’t mention any specific company by name, the primary recipient is believed to be Boeing.

The bill also indicates that an inspector general will oversee the recovery process, along with a special committee.

Small Business

Amount: $377.0 billion – 19% of total CARES Act

To ease the strain on businesses around the country, the Small Business Administration (SBA) will be given $350 billion to provide loans of up to $10 million to qualifying organizations. These funds can be used for mission critical activities, such as paying rent or keeping employees on the payroll during COVID-19 closures.

As well, the bill sets aside $10 billion in grants for small businesses that need help covering short-term operating costs.

State and Local Governments

Amount: $340.0 billion – 17% of total CARES Act

The biggest portion of funds going to local and state governments is the $274 billion allocated towards direct COVID-19 response. The rest of the funds in this component will go to schools and child care services.

Public and Health Services

Amount: $179.5 billion – 9% of total CARES Act

The biggest slice of this pie goes to healthcare providers, who will receive $100 billion in grants to help fight COVID-19. This was a major ask from groups representing the healthcare industry, as they look to make up the lost revenue caused by focusing on the outbreak — as opposed to performing elective surgeries and other procedures. There will also be a 20% increase in Medicare payments for treating patients with the virus.

Money is also set aside for initiatives such as increasing the availability of ventilators and masks for the Strategic National Stockpile, as well as providing additional funding for the Center for Disease Control and expanding the reach of virtual doctors.

Finally, beyond the healthcare-related funding, the CARES Act also addresses food security programs and a long list of educational and arts initiatives.

Hat tip to Reddit user SevenandForty for inspiring this graphic.

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Central Banks

Chart: The Downward Spiral in Interest Rates

As interest rates continue their historic spiral downwards, the world’s central banks are running out of conventional tools to settle markets.

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During the onset of an economic crisis, national governments are thought to have two chief policy tools at their disposal:

  1. Fiscal Policy
    How the central government collects money through taxation, and how it spends that money
  2. Monetary Policy
    How central banks choose to manage the supply of money and interest rates

Major fiscal policy changes can take time to be implemented — but since central banks can make moves unilaterally, monetary policy is often the first line of defense in settling markets.

As the ripple effect of the COVID-19 pandemic rages on, central banks have been quick to act in slashing interest rates. However, with rates already sitting at historic lows before the crisis, it is possible that banks may be forced to employ more unconventional and controversial techniques to try and calm the economy as time goes on.

The Fed: Firing at Will

The most meaningful rate cuts happened on March 3rd and March 15th after emergency meetings in the United States.

First, the Federal Open Market Committee (FOMC) cut the target rate from 1.5% to 1.0% — and then on Sunday (March 15th) the rate got chopped by an entire percentage point to rub up against the lower bound of zero.

Fed rate cuts historical

As you can see on the chart, this puts us back into familiar territory: a policy environment analogous to that seen during the recovery from the financial crisis.

ZIRP or NIRP?

It’s been awhile, but with interest rates again bumping up against the lower bound, you’ll begin to see discussions pop up again about the effectiveness of zero interest rate policy (ZIRP) and even negative interest rate policy (NIRP).

Although the latter has been used by some European banks in recent years, NIRP has never been experimented with in the United States or Canada.

Here’s a quick primer on both:

NIRP and ZIRP

With rates sitting at zero, it’s not impossible for the Fed and other central banks to begin toying more seriously with the idea of negative rates. Such a move would be bold, but also seen as highly experimental and risky with unforeseen consequences.

Global Rate Slashing

Since only the beginning of March, the world’s central banks have cut interest rates on 37 separate occasions.

The only exception to this rule was the National Bank of Kazakhstan, which raised its key rate by 2.75% to support its currency in light of current oil prices. Even so, the Kazakhstani tenge has lost roughly 15% of its value against the U.S. dollar since February.

Here’s a look at cumulative interest rate cuts by some of the world’s most important central banks, from January 1, 2020 until today:

Central Bank Moves YTD

Going into the year, rates in developed economies were already between 0% and 2%.

Despite not having much room to work with, banks have slashed rates where they can — and now out of major developed economies, Canada has the “highest” interest rate at just 0.75%.

Helicopters on the Horizon

With central banks running out of ammo for the use of traditional measures, the conversation is quickly shifting to unconventional measures such as “helicopter money” and NIRP.

Life is already surreal as societal measures to defend against the spread of COVID-19 unfold; pretty soon, monetary measures taken around the globe may seem just as bizarre.

Put another way, unless something changes fast and miraculously, we could be moving into an unprecedented monetary environment where up is down, and down is up. At that point, it’s anybody’s guess as to how things will shake out going forward.

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