Chapter 10

A World of Pain – Debt is Borderless

No one has it, this financial agony, as much as we do. Reeling in shock, disbelief and anger, it seems that no other country can be as terribly stressed. As bad as it might be for them, they could not have been impacted harder than the U.S. Right? Mmmmm, not exactly.

Chapter 10 Featured Submissions

“…It’s easy to cut on subscriptions, gym, holidays, etc….but electricity, gas, water, insurance, etc., still have to be paid. And yet, there are still a lot of people that refuse to face their reality and try to keep up appearances…”

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When we look over our borders to assess what others are experiencing, we see a world of pain.

Until recently, the leading – almost screaming – story in most financial news outlets concerned the debt crisis in Greece.  This was easy to understand – this country is running a budget deficit of 12.7 percent of GDP, and its debt to GDP is around 115 percent. Its per capita debt is $41,470 – less than the U.S. of $43,476.

But, although this is a country with an economy which is 27th in the world and accounts to barely 3% of the total EU market, it was the first sovereign (country) bailout to appear.

Argentina has its own unique woes, although its people each owe only (!) $3,375 each. Just as the nearly-broke government prepares a $20 billion debt-swap offer to satisfy bondholders and end the lawsuits on debt purchased before the country’s record $95 billion default in 2002, a U.S. court ruled that bondholders could seize $105 million in Argentina’s central bank deposits in the U.S. (We are some“safe haven,” eh?)

In Ireland (it’s per capita debt is included with the British), the Anglo Irish bank has become a nightmare, and the country is struggling over whether – or how – to save a bank with a capital hole of €9.3bn for this year, and a further €10bn over the next several years.

Japan only owes $4,528 per citizen, but has been the poster child for a debt-ridden economy. It’s situation is instructive to us, in that this country has been (for years) trying to revive from an asset-bubble burst in the 1990’s. It has done this mostly by increasing its exports while also borrowing heavily.

Will Japan ever be able to grow out of or pay down its debt? That is a question that the United States will also have to ask itself as well, some day.

Based on external debt, on a per-capita basis, how do we compare in sharing this pain?

The U.S. is running record deficits, 8 million people are unemployed and external debt is 94% of our GDP (we rank #1 in total outstanding debt among all countries). Even so, the per-capita share is $43,646.

The Brits owe $150,673 each, and their external debt is 365% of GDP. Germany has saddled each of its citizens with $63,350 in debt.

Really scary? Luxembourg citizens each owe $3,970,514 – a debt of 4,973.68% of their GDP!

Want to move someplace to escape debt burden? Well, Lichtenstein, Palau and Macau each owe $0. Too far? Well, exchange capitalism for communism and move to Cuba, where the per-capita load is only $194 – and they throw in excellent cheap cigars and rum!

But, enough about them, more about us!

Just like politics, all debt is local. Only nine of our 50 states are in fairly good shape; 41 states have revenue shortfalls.

Arizona is struggling with a project $2.6 billion budget shortfall. In New Jersey, the newly elected governor has proposed a series of budget cuts that would result in public schools receiving $820 million less in state aid. California, renowned for its network of public colleges and universities, is cutting billions of dollars from that system.

In the first two months of this year, state and local governments across the U.S. cut 45,000 jobs…and more cuts are down the road. How do these newly-unemployedpeople pay their bills – or their own taxes to the cities and states that once employed them?

I believe you have gotten the point, and can tell where this chapter will be headed when WOAA is finally published later this year.

Will reader contributions continue to be doom-and-gloom, or will we have turned a corner? Will the “wisdom” of the crowds of people following this book-in-process and helping fill the pages give us solutions to a bright future – or a eulogy?

Stay tuned.  Better yet – share your own thoughts.