The below figures were sent to me from Investopedia.com

Japan has $6,327 billion worth of currency in circulation, according to the CIA World Factbook
, as of December 31, 2010. This is based on M1 money which includes notes, coins and demand deposits denominated in national currency. The currency was then converted into U.S. dollars at the December 31, 2010 rate.

1. Japan – $6,327,000,000,000
2. European Union – $5,542,000,000,000
3. China – $4,028,000,000,000
4. United States – $1,957,000,000,000
10. Switzerland – $459,700,000,000
22. Greece – $153,300,000,000

Anthony DiChi,
Your friend in Forex Currency Trading and Forex News.

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.

Click here to read about 10 Most Indebted Nations

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

The below figures were sent to me by Investopedia.com

One of the most popular, measures is debt as a percentage of GDP. This tells you how likely it is that a nation is going to be able to pay its bills. In this sense, GDP is income, so the more GDP you have, the more debt you can service.

As far as measuring which nations are struggling, the debt to GDP is an excellent measure. The public debt to GDP listing, compiled in the CIA World Factbook, is reassuring in this sense. It’s top 10, based on 2009-2010 data includes:

1. Zimbabwe 234.10%
2. Japan 197.50%
3. Saint Kitts and Nevis 185.00%
4. Greece 142.80%
5. Lebanon 133.80%
6. Jamaica 126.50%
7. Iceland 126.10%
8. Italy 119.10%
9. Singapore 105.80%
10. Barbados 102.10%

The United States is far down the list at number 32. The U.S. has the highest GDP for a single nation, in other words, excluding the E.U.. The U.S. GDP hasn’t come in under $14,000 billion since it broke that level in 2007, so the debt situation of the U.S. isn’t as bad in this context, when compared to Japan. Japan has a GDP of around $5,459 billion and public debt over $10,000 billion.

The reason that Japan hasn’t folded, is that over half of all Japanese debt is held domestically. This gives Japan the advantage of relatively friendly hands holding its IOUs. There is also another economic advantage that economists see in the Japanese situation: most of the interest payments on the debt, make citizens wealthier and more likely to buy things domestically. This makes some sense, but the theoretical domestic buying boom either hasn’t yet hit its stride in Japan, or the debt situation has grown beyond the point where this beneficial side-effect is noticeable.

Click here to read about 10 Most External Indebted Nations

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

Re-posted from the Daily Reckoning

Making Way for the Era of Sovereign Default

Eric Fry Reporting from Laguna Beach, California… The Daily Reckoning

American investors returned from their Labor Day holiday to face another laborious trading day on Wall Street. As your California editor pecks away at his keyboard this afternoon, the Dow Jones Industrial Average is down more than 200 points to within spitting distance of 11,000.

For the first three trading days of September 2011, the Dow has tumbled more than 600 points — or about 5% — the worst three-day start for the month of September in the history of the US stock market. (Thanks to CNBC for this utterly meaningless statistic).

As it happens, the Dow is also down about 5% for the year-to-date, and down about 5% from its record high of October 2007. “Down 5” is not exactly the new “up,” but it feels like it. Over in the Old World, the best-performing stock market in the European Union is down 20% for the year. That’s the best one.

If you jump outside the euro zone, into the countries that opted not to latch the euro albatross around their necks, you find a couple of star performers like the British and Swiss stock markets — both down only 13% for the year.

The main problem, both here and there, is credit — or rather, credit contraction. Lots and lots of people, along with lots and lots of governments, are facing debts they simply cannot pay. However, instead of allowing the inevitable defaults to occur and to run their course, governments and central banks throughout the Western World are tirelessly cobbling together ad hoc bailouts, guarantees, rescue packages, emergency lending facilities and debt “workout” schemes — all designed to reverse the force of economic gravity.

But overly indebted entities will default, just as inevitably as flying pigs will hit the pavement.

The glide path of Greece’s financial condition is obvious. This pig is heading for the pavement, as are all the other PIIGS nations, which is why the European Union is so busy stacking up pillows and mattresses on the ground below.

The EU says its bailouts will enable Greece, Portugal, Ireland, Italy and Spain to enact the “austerity measures” that will restore solvency and keep their governmental finances airborne. Unfortunately, the effort to keep these struggling nations afloat threatens to sink the entire European Union.

Why not let the PIIGS fall to the pavement? Why not let overly indebted entities fail; let capitalism do its dirty work, so that the next generation of capitalists can step in and finance the next generation of successful enterprise.

The longer — and more strenuously — the central banks and governments of the West attempt to forestall inevitable defaults, the longer — and more painfully — the stock and bond markets of the West will abuse investors.

And let the record show that merely asserting a truth does not make it true. Central bankers and politicians can assert as often as they wish they their rescue efforts are effective, but that does not make it true. In fact, increasingly, the folks with capital at risk are “calling B.S.” on that assertion.

After more than 18 months of efforts and hundreds of billions of dollars of bailout funds pouring into Athens, Greek finances are still as sick as Dionysus after a long night of drinking. To wit: Greece’s borrowing costs hit a new record high today. To borrow money for two years, the Greek government would have to pay a whopping 52.3% per year. The US Treasury, by contrast, pays a minuscule 0.20% on its two-year debt.

You don’t have to be a professional investor to see that Greece is in trouble. But apparently, you do have to be a professional politician or central banker to believe that it isn’t. And as the dismal performance of the European stock markets testifies, the Greek problem is already a Europe problem. The chart below emphasizes the point.

The squiggles on this chart track the pricing of two different types of credit default swaps (CDS). Don’t let your eyes glaze over just yet. This is fascinating stuff. And even if it isn’t fascinating, it is instructive. CDS, to refresh, are an insurance policy against default by a specific borrower. Therefore, the greater the perceived risk of default, the higher the price of the insurance, i.e., the CDS.

The blue line on the chart tracks the average price of 5-year CDS on debt issued by 125 different European corporate borrowers. The red line tracks the price of 5-year CDS on debt issued by the French government. During the depths of the credit crisis of 2008-9, the price of CDS on European corporate debt was more than double the price of CDS on French government debt. In other words, investors were much more worried about defaults by European corporations than they were about a default by the French government.

As of this week, however, the price disparity between European corporate CDS and French Government CDS has disappeared completely. In fact, it has inverted. Investors now consider a default by the French government to be more likely than a default by the average European corporation.

This price trend does not suggest that a default by the French government is probable. In fact, such an eventuality seems highly unlikely. But the price trend of French CDS relative to corporate CDS, does suggest that a new phase of the credit crisis is underway.

The Era of the Sovereign Default is underway. Greece will be the first, but it won’t be the last.

As this sovereign default cycle unfolds, government bond yields are likely to climb, economic activity is likely to slow and paper currencies are likely to depreciate relative to gold and other hard assets. That’s the bad news.

The good news is that post-default nations will emerge leaner and meaner and ready to initiate a new era of economic growth.

That’s how the world works…or at least how it should work. It is probably no accident that this year’s very, very short list of winning stock markets features countries that suffered a painful sovereign default and/or currency crisis within the last 20 years.

The stock markets of Indonesia, Thailand, Vietnam, Philippines, Iceland, Ghana, and Venezuela are atop the leader board for 2011 with positive performances.

Default is painful, but it is also a necessary component of the economic life-cycle.

Click here to go to The Daily Reckoning

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

As posted on Investopedia

Switzerland’s famous neutrality is a significant factor in its economy and currency. Though Switzerland harmonizes many of its policies with the Eurozone countries, it is not a member and it maintains its independence. What’s more, as a global destination of choice for expatriated capital, Switzerland is less sensitive to the economic performance of its neighbors.

Switzerland does have some risks with its heavy reliance on its banking sector. Under pressure from countries like the United States and Germany, some of Switzerland’s bank secrecy laws have been relaxed. That is likely a concerning development for dictators, criminals and businessmen who want to keep their wealth both safe and secret. As a result, other countries like Singapore have begun tightening their rules and promoting themselves as emerging alternatives to Switzerland for offshore accounts.

Another odd aspect to the Swiss franc is that, in many ways, it is a currency and not a country. While the U.S. dollar is certainly boosted by its heavy weighting as a reserve currency and its safe haven status, trade in the dollar is still largely dictated by the economic conditions of the United States. For the Swiss franc, it sometimes seems that only the interest rate decisions of the SNB really matter. Perhaps this is because Swiss governments have maintained largely consistent economic policies (no one expects anything wild from the Swiss), or perhaps it is because demand for the Swiss franc is dominated more by its utility as a liquid, stable and reliable alternative currency.

Click here to go to Investopedia to read more….

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