Can somebody explain world debt

[AJI]

Here is a list of countries that owe money externally:
http://en.wikipedia.org/wiki/List_of_countries_by_...

From this I take it that they owe money to another country?

This would be fine, but it appears EVERY BLEEDING country is on that list!
Meaning, who is everyone borrowing from?

How can one country buy the debt off another if itself has no money. ie. that country is also in debt.


If this is how the system works then why would any country be bothered at all about how high the debt goes?
They surely could just keep borrowing imaginary money from each other and just sit and laugh at the high figures.


Clicking on the map from the above link shows a colour coded view of the world:
http://upload.wikimedia.org/wikipedia/commons/e/ed...

(Fitting that they colour the worst in debt by the same colour as $hyte)

Looks like the capitalist countries are the worst in the stinking brown. As expected I guess.



But anyways, if somebody could explain how the borrowing of money from other countries that do not have money works in layman terms it would be much appreciated.


(Yes, before anyone asks, I was a bit craap at economics at school).

[thinfourth2]

I don't understand it either but i know it is all winkies fault

[crankedup]

Same as the banks debts, they bundle up all the crap debts they want to off load and another bank comes along to buy that bundle of debt. The idea being that the buyer believes that nothing can go wrong and it will make money from the interest that they charge to the debtors within that bundle they have just purchased. Well its a good theory!

[Stevenj214]

http://en.wikipedia.org/wiki/Ponzi_scheme

[trickywoo]

The whole economy is a confidence trick.

Up till now its been running on a pyramid scheme basis. Some people (bankers - wait for it PH is full of bankers )got a bit silly / greedy and its been found out. Hence the current mess. It'll all be forgotten in 10 years and the cycle will start again.

[El Guapo]

AJI said:

Here is a list of countries that owe money externally:
http://en.wikipedia.org/wiki/List_of_countries_by_...

Interesting. Every person in Luxembourg owes somebody $3.75million
Liechtenstein, on the other hand, has no debt.

[XTR2Turbo]

What is interesting is how relatively low Greece appears which kind of suggests it is a government problem and not a country problem and that it is the Greek banks and private sector that should be helping sort out the mess rather than just not paying their taxes and not other European countries.

[gary hubbard]

sorry i don,t agree in 10 years it will all start again . countries like uk has no way of getting over this mess as we have industry to bring money back into the country . to many people bleeding the country . theres to much money goin out not enough coming back in .we are to dependant on other countries for our main basic items . eg fuel inculing gas and elec. and for our food .basicly most things we buy are from other coutries. now we can,t afford to reinvest to bring idustry and farming back to the uk . now it has mostly gone the other counties that supply us can basicly name there price on every thing we import . we had alot of problems back in the 60s 70s where coal miners and farmers wanted to name there prices so the goverment said f--k you all and started closing them down . i do no it was cheaper to bring things in . but look at the mess we are all in now .

[youngsyr]

The reason that it doesn't make sense to you that every country can owe money to every other country is because you've overlooked that each country can create wealth through exploiting it's own resources independently of other countries.

Each country therefore has an "external" (to the circle of debt) source of income to pay back debts and lend to foreign countries.

[youngsyr]

gary hubbard said:

sorry i don,t agree in 10 years it will all start again . countries like uk has no way of getting over this mess as we have industry to bring money back into the country . to many people bleeding the country . theres to much money goin out not enough coming back in .we are to dependant on other countries for our main basic items . eg fuel inculing gas and elec. and for our food .basicly most things we buy are from other coutries. now we can,t afford to reinvest to bring idustry and farming back to the uk . now it has mostly gone the other counties that supply us can basicly name there price on every thing we import . we had alot of problems back in the 60s 70s where coal miners and farmers wanted to name there prices so the goverment said f--k you all and started closing them down . i do no it was cheaper to bring things in . but look at the mess we are all in now .

You really should read "Made in Britain" by Evan Davis, or failing that watch the series by the same name on iPlayer.

[otolith]

In the case of our own debt;

[trickywoo]

gary hubbard said:

sorry i don,t agree in 10 years it will all start again . countries like uk has no way of getting over this mess as we have industry to bring money back into the country . to many people bleeding the country . theres to much money goin out not enough coming back in .we are to dependant on other countries for our main basic items . eg fuel inculing gas and elec. and for our food .basicly most things we buy are from other coutries. now we can,t afford to reinvest to bring idustry and farming back to the uk . now it has mostly gone the other counties that supply us can basicly name there price on every thing we import . we had alot of problems back in the 60s 70s where coal miners and farmers wanted to name there prices so the goverment said f--k you all and started closing them down . i do no it was cheaper to bring things in . but look at the mess we are all in now .

That assumes prosperity is built on someting tangible.

That is sometimes the case but not always.

I really do believe the economy is a ponzi scheme, hence the long history of boom and bust. Each generation forgets the actions of the last or thinks they are more intelligent and have found a new economic model. It will always follow the same pattern.

[gary hubbard]

youngsyr said:

You really should read "Made in Britain" by Evan Davis, or failing that watch the series by the same name on iPlayer.

saw that . we still are not producing enough. yes we do have small amount of companys but even them are still mostly owned be foreigners.where all we get out of it is jobs . its not enough . other couties that have industies eg germany are in growth . still don,t get it all our power and most of food suppiers the foreign . we have all been sold out by goverments . we all no it but no 1 seems to do anything about it . in business if you have to sell assets you are in trouble and uk goverments have been sell uk assets for years .

[blueg33]

To answer the OPs question. This is my very basic understanding

The money is borrowed from companies and individuals in the form of Gilts and Bonds. eg if you buy a Premium Bond you are lending money to the Government.

These loans often have a guaranteed rate of return. The risk/return depends usually on the credit rating of the country. Eg Greece = risky therefore lenders want more return.

This all affect the banks as they are big investors in gilts, so if a country like Greece defaults on its debt the banks, the pension funds and the individuals have to pick up the tab. Hence the volatility in bank shares when the news reports potential defaults.

[Andy Zarse]

trickywoo said:

The whole economy is a confidence trick.

Up till now its been running on a pyramid scheme basis. Some people (bankers - wait for it PH is full of bankers )got a bit silly / greedy and its been found out. Hence the current mess. It'll all be forgotten in 10 years and the cycle will start again.

Please explain how the bankers caused Gordon Brown, and come to that the Greek PM Mr Papandropoulis or whatever his name is, to spend more money on public services than he was taking in in taxes.

In other words, how did bankers cause the Greek Govt to default on their loans?

[Adrian W]

Poland seem to be doing rather well at the moment, something to do with not spending more than they have coming in!!

[grumbledoak]

As said, it's Ponzi again. Our grandparents fked us over and we are doing the same to our grandkids.

[devonshiredave]

In a very simple sense look at it as the global arbitrage between what you can borrow money for and what you can lend money for

[youngsyr]

gary hubbard said:

youngsyr said:

You really should read "Made in Britain" by Evan Davis, or failing that watch the series by the same name on iPlayer.

saw that . we still are not producing enough. yes we do have small amount of companys but even them are still mostly owned be foreigners.where all we get out of it is jobs . its not enough . other couties that have industies eg germany are in growth . still don,t get it all our power and most of food suppiers the foreign . we have all been sold out by goverments . we all no it but no 1 seems to do anything about it . in business if you have to sell assets you are in trouble and uk goverments have been sell uk assets for years .

Manufacturing accounts for 17% of UK GDP compared to 23% in Germany, hardly a massive difference. The point of the book and series is that a lot of what we manufacture isn't as obvious as what others produce as we produce parts for larger items rather than assembling the larger items themselves.

On top of that, the series made the point that services are no less important to an economy than manufacturing and it's a natural evolution for a developed economy to move away from manufacturing into services as anyone can bolt things together, but designing new and better ways of bolting things together is where the value is added and if you want a rich society, you need to focus on the higher value activities.

If that isn't convincing you, look at Japan, they've had their famous "lost decade" and yet are a leading manufacturer.

The UK government selling assets is a whole different story - they don't own the private manufacturing companies that we're talking about (thank god) and so are unable to sell them. They can regulate the sale of UK companies to foreign buyers, but why would you want to do that? Look how much money some of these foreign companies bring to the UK when they acquire UK businesses - just look at Chelsea or Man City for two very obvious examples.

[The Excession]

youngsyr said:

Manufacturing accounts for 17% of UK GDP compared to 23% in Germany, hardly a massive difference

Can I just try and work this through and put it in context?
I'm pretty sure (hoping) I'm doing this wrong and hope someone can put me straight.

According to this in 2010

GER GDP = 3,315,643 millions of US$
UK GDP = 2,247,455 millions of US$

(numbers vary according to who you ask, but if accurate they appear to be in broad agreement)

So a difference in GDP of 1,068,188 millions of US$


Now if the manufacturing difference is just 6% (23 minus 17) then 6% of the difference in GDP should be down to manufacturing.

So 6% of 1,068,188 millions of US$ = ~64,091 millions of US$ -

So in millions of US$ we have 64091280000$

So if we ask the NSO how many people in the UK are employed: The number of people in employment aged 16 and over increased by 50,000 on the quarter and by 309,000 on the year to reach 29.28 million.

So 29280000 people working and a shortfall in manufacturing of 64091280000$

That would be 2188.91$ deficit for EVERY working person in the UK - not just people involved in maufacturing.

Now whilst as the OP states that's perhaps not a massive % difference, it's still a massive amount of money and I'm really hoping someone can point out where I got the sums wrong.