This is a tale of two tables and a moral on lies, damned
lies and statistics. This morning’s Daily Chart in the
Economist features a table of government debt. Streaking ahead of the rest, the
dubious distinction of topping this chart fell to Japan, with gross government
debt reaching 230% of GDP.
The financial markets are swirling with speculation
on an imminent Greek debt default, and the Hellenes labour under debt at 165%
of GDP. The article explains that Japan’s debt is more manageable than the
Greeks because the vast majority of it is domestically held, and because a
decent chunk is offset by other financial assets.
At the Liberal Democrat party conference, Vince
Cable likened the present fiscal situation to being the economic
equivalent of war. We are told that our financial position is precarious,
and that austerity is the only solution. It might then be a little surprising
to see Britain at the foot of the table, with a debt of 80% of GDP. Only Spain
does better at a little over 70% of GDP. The stalwarts of fiscal rectitude,
Germany, have a debt just above 80% of GDP and the USA has just reached 100% of
GDP.
So is all this overblown? Should we pump-prime the
beleaguered economy and spend for growth? Another set of statistics suggests
that the caution may be justified. These are the figures for the total level of
debt (set out in a recent
Buttonwood column in the Economist, and also in
this article from Global Finance), including government debt but also
including business (financial (i.e. banking) and non-financial (i.e. business)
and household debt. The graph below (click for large version) demonstrates the relative levels of debt.
Britain comes close to rivalling Japan for the
top spot, with an eye wateringly high figure of 466% of GDP. At the foot of the
table come the BRICs – Brazil (142%), Russia (71%), India (129%) and China
(159%). This is borne out in the Economist’s map, which paints these vast
countries in the reassuringly sober green reserved for those with total debt of
less than 200% of GDP. Britain and Japan, by contrast, are alarmingly red.
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