=economics =finance
Among developed countries, Japan
has long
had the
highest debt/GDP ratio, currently ~232%. That seems pretty bad, and
conversely has made some people say that the US debt is fine because it's
still much lower than Japan's. But here are some points that might clarify the
situation:
First, that ratio has declined
recently, from
258% in 2020.
Second, the Japanese government holds a lot of stocks
and foreign
bonds.
Its net debt/GDP is "only" 140%, and has declined since 2020. The US
government doesn't do that. (The government of Singapore also holds a lot of
assets, and Temasek is
well-known as a large investment fund, but Japan is a bigger country, and
despite smaller holdings per capita, its investments are much larger than
Singapore's.)
Meanwhile, America's federal debt/GDP
ratio is ~124%. Add in state debt and it's
~127%. So the net debt/GDP of the US government isn't that different from
Japan. It's still higher, but arguably the "quality" of that US GDP is
lower, for a couple reasons:
1) The US has
a worse trade balance than Japan. It borrows more money, and has a net
inflow of investment. That investment and borrowed money then circulates
around and raises GDP by some multiplier, mostly by making both prices and
incomes higher in the US.
2) Japan has higher PPP/nominal GDP than the US, by a factor of ~1.6x.
Arguably this is a better measure of ability to pay back debt with real
stuff than nominal GDP.
On the other hand, the US does have more
natural resources, and the federal goverment owns a lot of land. My point is
just that, while I've often seen it said that the US government debt
situation is clearly better than Japan's, that's not clearly the case.
By the way, another economic metric I think is interesting to compare is
median and average personal
wealth.