10 Most External Indebted Nations

The below figures were sent to me by Investopedia.com

External debt is a measure of the public and private debt, that is owed to non-residents. This list compiled by the CIA.

1. United States $13,980 billion
2. European Union $13,720 billion
3. United Kingdom $8,981 billion
4. Germany $4,713 billion
5. France $4,698 billion
6. Japan $2,441 billion
7. Ireland $2,253 billion
8. Norway $2,232 billion
9. Italy $2,223 billion
10. Spain $2,166 billion

Now, there is no reason to panic, despite the U.S. taking over the top spot. The foreign holdings of treasuries total about $4,500 billion, so this is not all public debt, by any stretch. Unlike domestically held treasuries, however, the external ones are making interest for non-citizens, making it less likely that the money will be put back into the economy in any way. In the end, external debt just means interest and principle payments are going abroad and adding to another country’s GDP.

How Did We Get Here?
The U.S. has a lot of external debt, true. There are two ways of looking at it, one is the debtor nation view, where the more external debt a nation has, the more likely it is giving away its future, in the form of interest payments to foreigners. The second way is the investment destination view, where so many foreigners are looking to lend and invest in the debts of U.S. citizens, companies and the government, that the low interest loans can be used to build more economic capacity, to produce more capital to pay off these cheap loans.

The truth is that the U.S. is a bit in between the two scenarios. It’s strong GDP numbers make it one of the most attractive investments compared to other struggling nations, but this huge foreign debt load has passed the healthy level and is edging up to dangerous levels. Just because other nations are willing to lend cheap, and the U.S. is willing to spend, doesn’t mean there aren’t long term consequences.

The Bottom Line
Debt is a matter of perspective. The health of a nation is not so different from the health of a business. If a nation is borrowing to build infrastructure that will pay off in the future, then having a lot isn’t necessarily bad. If, however, the money is being poured into areas with little or no return, then the burden on the economy to pay those debts will eventually lead to more economic hardship in the future. A fair assessment would involve tracking what each dollar of private and public debt, goes towards purchasing. Some studies exist on this subject, but it is best left for another day.

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Anthony DiChi,
Your friend in Forex Currency Trading, FX Information and Forex News at TradeCurrencyNow