As global debt surges, I thought it would be appropriate to rate governments debt and comment on them and see what the rating agencies have to say.
I am going to make this one simple which rating agencies are not.
Lets look at some of the major economies and how they are rated on their debt.
How about Canada?
Canada has recently announced it'll run deficits until 2046. So in other words Canada's AAA rating should be CCC which is extremly speculative. Canada has no intension to ever pay their debt down. If you've read my book Canada, The Greatest Economy In The World? You have seen that Canada has no exit strategy on their debt. You might as well rate them D as Default. That is where they are heading with current economic policies. Big Government growing bigger and more and more taxes to support their overspending as they run deficits!
USA? How is the US doing?
AA+ is their current rating which is worse than Canada. How is that possible? Canada has no plans to ever pay down their debt. Does the US? Well the US have a substancial tax cut plan. Which is all good, but you have to cut government expenses as well. If you don't you will have a high in the economy until the government keeps on groving until there is a new tax cut? The US has over $20.5T in debt and itæs rapidly increasing. Knowing Trump he is an expert on bankruptcies and he is the right man for a bankruptcy of the US which should be rated CCC as well.
Japan?
Japan is currently rated A+. They have the worlds highest Debt to GDP by far with currenly 250%+. This is almost 100% more than the Bankrupt country of Greece which is rated. B- which is highjly speculative. Greece should be rated D which is default with getting bail out on bail out. Back to Japan. With printing trillions of Yen over the last years and little growth as their population has been in a deflation Japan should be rated D for Defaul as they will never ever pay the debt back or just end upo in a hyper inflation.
The Eurozone?
With many economies on the verge of Default like Italy, Greece, Spain, Portugal and many others The Euro is on it last legs with massive QE printing with no exit strategy. The Eurozone is close to default so I would rate their debt CCC as many countries are on the verge of bankruptcy.
Egypt?
Egypt is one of the biggest economies in Africa and with a recent devaluation of their currency they are slowly on their way to collapse as well as their currency had to be devalued which is a way of stealing their pensioners and savers money. Egypt is CC as it is not in as bad shape as Canada and US.
We might as well rate all nation states CCC with a downward trend towards D. With Keynesian Economics in the driving seat the PHD's believe that they can print without defaulting. The truth is that they will default as their currency will lose its value through the trust link broken in a hyper inflation. Debt is rampant and with many government being over 50% of the economy they are close to collapse and default.
The Major econmomies that have a government that are bigger than the private sector they rely on. The Governments listed below will and should be rated D as they have become bigger than the private sector economy that funds them.
France 56.20
Finland 56.10
Denmark 53.60
Belgium 53.30
Austria 51.10
Norway 51.10
Sweden 50.00
Italy 49.60
Greece 49.00
Croatia 48.40
Euro Area 47.70
Hungary 47.50
European Union 46.60
I thought it was a good time to mention another measure I use and watch. Private debt to GDP. If you look at government taxes and Government size to GDP there is a clear corelatoion between the two. Private debt to GDP is the measure of the private sectors debt. As you can see below high taxed countries with big government are the most indebted ones as people replaced their stolen income with debt.
Country
Luxembourg 483.80
Ireland 421.94
Iceland 314.90
Norway 282.92
Belgium 270.40
Portugal 269.70
Canada 266.89
Netherlands 266.14
Denmark 265.18
Sweden 263.47
Korea 253.75
South Korea 253.50
Japan 231.10
United Kingdom 230.51
France 228.93
Australia 223.38
Switzerland 208.40
Finland 208.35
Spain 207.94
United States 199.60
The question here is, how these debts will be repaid. There are some wishful-thinking-theories saying that they will be forgotten and forgiven. I would not count on that!
I've wondered about that idea. Could government's cancel debts in equal quantities using a measure of say gold at a given point of time? 🤔
The people could, but I think government will collapse before that time.
One thing is certain - the taxpayers will have to pay the bill. That is one thing you can count on.
By owing so much, they subject the future of their citizens to jeopardy and their economic policies to the dictates of their creditors.
A real eye opener. Thanks for doing the leg work. Upvote for sure!
Thank you sir!
The only sound financial advice coming out of Winnipeg! Thanks for the post John, keep up the good work and thanks for keeping @joshsigurdson in line.
"in line"