Percentage of GDP to external debt: default is inevitable

[Atash Hagmahani]

Bear in mind that GDP is not necessarily accurately calculated! And you can guess on which side of the line it is likely to be on!

http://www.picassodreams.com/picasso_dreams/2009/12/percentage-of-gdp-to-external-debt-default-is-inevitable.html

Recently I saw a list of the percentage of external debt to GDP on the CNBC website.  Sadly, it is in a slide show presentation and a lot of people have missed these important numbers, so I am reproducing the figures here as listed on the CNBC site.

1. Ireland - 1,267%

External debt (as % of GDP): 1,267%
External debt per capita: $567,805

Gross external debt: $2.386 trillion (2009 Q2)
2008 GDP (est): $188.4 billion

2. Switzerland - 422.7%

External debt (as % of GDP): 422.7%
External debt per capita: $176,045

Gross external debt: $1.338 trillion (2009 Q2)
2008 GDP (est): $316.7 billion

3. United Kingdom - 408.3%

External debt (as % of GDP): 408.3%
External debt per capita: $148,702

Gross external debt: $9.087 trillion (2009 Q2)
2008 GDP (est): $2.226 trillion

4. Netherlands - 365%

External debt (as % of GDP): 365%
External debt per capita: $146,703

Gross external debt: $2.452 trillion (2009 Q2)
2008 GDP (est): $672 billion

5. Belgium - 320.2%

External debt (as % of GDP): 320.2%
External debt per capita: $119,681

Gross external debt: $1.246 trillion (2009 Q1)
2008 GDP (est): $389 billion

6. Denmark - 298%

External debt (as % of GDP): 298.3%
External debt per capita: $110,422

Gross external debt: $607.38 billion (2009 Q2)
2008 GDP (est): $203.6 billion

7. Austria - 252.6%

External debt (as % of GDP): 252.6%
External debt per capita: $101,387

Gross external debt: $832.42 billion (2009 Q2)
2008 GDP (est): $329.5 billion

8. France - 236%

External debt (as % of GDP): 236%
External debt per capita: $78,387

Gross external debt: $5.021 trillion (2009 Q2)
2008 GDP (est): $2.128 trillion

9. Portugal - 214.4%

External debt (as % of GDP): 214.4%
External debt per capita: $47,348

Gross external debt: $507 billion (2009 Q2)
2008 GDP (est): $236.5 billion

10. Hong Kong - 205.8%

External debt (as % of GDP): 205.8%
External debt per capita: $89,457

Gross external debt: $631.13 billion (2009 Q2)
2008 GDP (est): $306.6 billion

[opsec]

http://www.indexmundi.com/map/?v=94

There are a lot of countries - admitedly all 3rd world - that don't owe anybody any money at all. Maybe their currencies would be a safe place to park wealth? Somebody help me out here.

Definition: This entry gives the total public and private debt owed to nonresidents repayable in foreign currency, goods, or services. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of January 1, 2009

Djibouti                     0
Botswana                  0
Antigua and Barbuda    0
Grenada                     0
Bahamas, The             0
Cape Verde                0
Sao Tome and Principe 0
Saint Kitts and Nevis    0
Eritrea                       0
Saint Lucia                 0
Comoros                     0
Saint Vincent and the Grenadines 0
Dominica                    0
Equatorial Guinea         0
Malta                        0
Samoa                      0
Solomon Islands          0
Fiji                            0
Vanuatu                    0
Tonga                       0
New Caledonia            0
Cayman Islands           0
Nauru                        0
Greenland                  0
Kiribati                       0
Brunei                       0
Liechtenstein             0
Macau                      0
Palau                       0

Instinct tells me that Liechtenstein would be better than Botswana, but am I onto something at least in principle?

How about Canada? It doesn't appear on the top twent list above.

[The Future]

are you referring to safe as in "store of value"?  If the countries have invested in, say military equipment with their borrowings, they currencies may well appreciate rather than decline.  But in this case stick will the US dollar.  No one that I am aware of even approached the million dollar a minute budget and the gravity defying currency levitation (or is it a AAA rating?) that comes with it.

[Atash Hagmahani]

Quite a few of those countries are well-known as offshore asset havens. Liechtenstein would be a good one, because they also have banking privacy.

Botswana is reputedly the least corrupt nation in Africa, which is not surprising if it has no external debt as the two tend to go hand-in-hand.

[opsec]

What are you thoughts on investing in Canadian dollars? Stillborn idea?

[Atash Hagmahani]

"Investing", no, but it is probably a more "fault tolerant" currency than the $US, because the Canadian banking system is not as over-leveraged as ours, and the country is a major resource producer.

Several Canadians have urged me to cross the border into Vancouver to open up an account at a Canadian bank.

[The Future]

Again, sometimes what seems obvious can actually require counterintuitive action.  For example, a book i am reading points out how Korean bonds were functionally in default during their economic crisis yet the prices rose.  How?  Derivatives traders have arranged contracts betting on the default but in sum issued about 8 times more contracts that there were bonds.  To deliver the "devalued" bonds and close out their positions, they thus setoff a bidding war in the midst of a dramatic shortage where 87% of the people would lose their profits even though their bets on the default were technicaly correct.

Odd but true.

[offdalip]

20. United States - 94.3 %

External debt (as % of GDP): 94.3%
External debt per capita: $43,793

Gross external debt: $13.454 trillion (2009 Q2)
2008 GDP (est): $14.26 trillion

the number that is truly mind boggling is the gross external debt, it dwarfs all others.

owe the bank $1,000 and you are indebted to them.

owe the bank $1,000,000 and they are indebted to you.