8 ms·

Government Debt (chart)

58 points by CaptainZapp 15y ago

rvkennedy 15y ago
First thought: the Swedes are doing well! Why is 60% of GDP the target? What does this do?
- CaptainZapp 15y ago
  From the explanation : The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026. This is around the level considered healthy and is also the ratio set by the widely ignored Maastricht agreement, which is meant to govern debt in the European Union. It is not pretty.
- lucasjung 15y ago
  My understanding is that Sweden has drawn a significant portion of its revenues from North Sea oil, but that they are anticipating significant declines in production (and therefore revenue). They are preparing for this by grdually restructuring (read: cutting) government services and benefits to fit their anticipated revenue, with the added benefit that doing so in advance allows them to build up a decent nest-egg. In other words, they are doing something incredibly rare for a government: budgeting in a responsible and rational manner.
  - arethuza 15y ago
    I didn't know that Sweden had any oil - unlike Norway next door that is practically floating on the stuff.
  - mseebach 15y ago
    I couldn't find anything definitive on Google, but I don't think Sweden has that much oil, and if they do, it's not in the North Sea (which isn't bordering Sweden). (You might have meant to refer to Norway or Denmark which fits your description quite well)
  - RuadhanMc 15y ago
    Pretty sure that you are thinking of Norway. Sweden doesn't do oil in any serious way. Sweden is trying to be oil-free. http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Society http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Socie... According to Wikipedia (http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden) Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. That's quite a nice spread.
    - bh42222 15y ago
      Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. And ABBA. (I'm only half joking the royalties on their music equal quite a few Volvos.)
      - bh42222 15y ago
        Replying to myself because someone on the Internet is wrong! ... between 1974 and 1982,they earned nearly twice the GNP of Sweden From: http://www.artistfacts.com/detail.php?id=322 http://www.artistfacts.com/detail.php?id=322
        RuadhanMc 15y ago
        That is pretty staggering... This too: "When ABBA was active, only the Volvo car company made more money in Sweden.".
  - Tuna-Fish 15y ago
    Sweden has practically no oil production at all, and never had any. The Scandinavian country with large oil reserves is Norway. What you are talking about doesn't even describe Norway properly -- they have largely not spent the revenue they got from oil. Instead, it has been collected into a sovereign wealth fund. At present, the fund holds some $100 000 for every Norwegian. Future decline of oil profits will be covered by the investment income from the fund. There hasn't been any cutting of government services to fit revenues -- there hasn't been any need to. Sweden, like the other Scandinavian countries, has held a responsible and rational budget for most of it's existence as a democratic country. So while it might be incredibly rare for governments worldwide, for some reason it seems that the Scandinavians can make the idea of a well-run welfare state work. I have yet to figure out why they can do it and most of the rest of the world seemingly can't.
    - furyg3 15y ago
      The Norway situation you describe is correct. Normally an influx of wealth from oil (or other natural resources, even humanitarian aid) will suppress the country's abilities to be competitive in manufacturing or other (non-oil) sectors. It's often called a "Resource Curse" or "Dutch Disease". Avoiding the curse requires not to spending the oil money directly... and instead to invest it and spend only the interest.
    - henrikschroder 15y ago
      > I have yet to figure out why they can do it and most of the rest of the world seemingly can't. It helps a lot to have a small country with an ethnically homogenous population, extremely low corruption, high tax morale, and high public trust of government offices and institutions.
      - bh42222 15y ago
        It helps a lot to have a small country Maybe, or a big but dictatorial country like China. an ethnically homogenous population Care to elaborate? Would you consider countries such as Switzerland, Canada, Taiwan, and Singapore ethnically homogeneous? extremely low corruption, high tax morale, and high public trust of government offices and institutions. Chicken and egg problem - High tax compliance and trust in government come from having a reasonable tax rate from which you get a lot of effective government services. Low corruption is a pre-requisite for trust in government institutions. I bet what also helps is not having a culture of cousin marriage, that seems to create a culture where is much more difficult to have any kind of trust with people outside of your clan. I think the modern well functioning democracy is to a very large degree a result of complex game theory. You don't have to look back much more the 2 centuries, to see thousands of years of European history that's full of corruption, lawlessness, crushing tax rates, all the typical modern day 3rd world problems and then some. If just being Swedish led to modern Sweden, Swedish history would be a lot less interesting. For one, it would almost certainly be entirely Viking free.
- mixmax 15y ago
  The Swedes had a serious financial crisis in the mid 90's and learnt their lesson. They've been running a sound fiscal policy ever since.
  - arethuza 15y ago
    Maybe the Greeks should invite the Swedes to run their country for them!
    - bh42222 15y ago
      Well.... the EU is sort of, kind of, like that. The treaty of Maastricht, EU regulations superseding national regulations, it's all supposed bring rich north western European style government to the poorer more chaotic south and east parts of Europe. <sarcasm>And it's working out great!</sarcasm>
    - henrikschroder 15y ago
      That wouldn't help, the underlying problem is that the general tax morale is much lower in Greece compared to Sweden.
- guelo 15y ago
  The Swedes just used basic Keynesian economics to fight the recession. They went into the recession with the budget in good shape, unlike the Bush approach of deficits and expensive wars. Then when the recession hit their huge welfare system kicked into high gear plus they added a stimulus of tax cuts and infrastructure projects, unlike the Obama approach of no net stimulus when you add the smallish federal stimulus minus state government cuts. Also their central bank cranked up QE higher than our Fed, and their politicians didn't run around freaking out about "debasing the currency". Read about it here http://www.washingtonpost.com/business/economy/five-economic-lessons-from-sweden-the-rock-star-of-the-recovery/2011/06/21/AGyuJ3iH_story.html?nav=emailpage http://www.washingtonpost.com/business/economy/five-economic...
  - pragmatic 15y ago
    Fantastic point. I don't think enough people understand that Keynes doens't work if you are running a massive deficit all the time. In good times you _need_ to be solvent so that in bad times, extra gov't spending will actually have an effect. The US is not able to implement Keynesian policies b/c we borrow and spend constantly.
    - watchandwait 15y ago
      None of the American "Keynesians" calling for deficit spending today called for a balanced budget 5 years ago during the boom. I'd argue there are no true Keynesians, just politicians looking for an excuse to continue spending.
      - guelo 15y ago
        If you didn't hear liberals complaining that we couldn't afford the wars and Bush's tax cuts then you weren't paying attention.
  - beatpanda 15y ago
    In fairness, that wasn't the "Obama approach". The stimulus was whittled down by the Congress.
- larrik 15y ago
  Sweden also seems to offer free college tuition, even for advanced degrees. Coincidence? Maybe... It's too bad you apparently can go to jail there if you have sex with someone, they regret it, and then a politician wants to make that a crime afterwards.
  - Vivtek 15y ago
    ... and you refuse to comply with requests for investigation and flee the country.
    - marshray 15y ago
      If you're referring to Assange, as I understand it he'd already spoken with prosecutors once and they explicitly declined to prosecute. He was not under any order not to leave, so he didn't "flee the country". I would probably decline to return to some country for my transparently politically-motivated prosecution too.
- icegreentea 15y ago
  60% is the something like the global average.
- pragmatic 15y ago
  The Swedes are just ahead of the curve. They crashed in the 90's: http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden Then they reformed and recovered.
- pragmatic 15y ago
  Can any Swedes confirm/deny this summary of the pension plan: http://www.heritage.org/research/reports/2000/06/pension-reform-in-sweden-lessons-for-american-policymakers http://www.heritage.org/research/reports/2000/06/pension-ref... "Partial privatization. Workers can invest 2.5 percentage points of the 18.5 percent of their income that they must set aside for retirement. Soon workers will be able to choose the pension fund into which the funds will go." Any talk of even partial privatization in the US gets the old folks quite worked up. Political scare tactics and such. Plus a healthy (and not unwarranted) distrust of Wall Street that would love to get it's filthy paws on _even more_ retirement money.
  - CaptainZapp 15y ago
    I can't speak for Sweden, but for Switzerland where your pension rests on three pillars. Two of them mandatory and one where you're free to invest, but receive tax benefits if you do: Pillar 1 is called AHV (AVS in French). This is the responsibility of the federal government and there are no plans to privatize this; ever. Since there is a maximum payout, which is quite low it has a certain wealth redistribution component. That is: When you make a lot of money you pay a percentage into the fund, which is a percentage of your earnings. So, a person making a lot of money pays more into it, but since the payout is capped at a fairly low level, he may get the same benefits as somebody who earned much less and thus payed much less into the fund Pillar 2 is the actual pension plan, which is mandatory. Every company must insure their employees and big companies run their own schemes. While those funds are privately run, there are strong restrictions in place how they can invest the money of their insureds. The difference to the AHV is that the payout depends on the amount you payed in over your lifetime as a worker. Payout is based on a formula and the age of retirement can be dependent on the insurer. Employees don't have a choice about which pension plan they have and there are differences in quality. I could imagine that the system in Sweden is comparable (private, but very restricted in how they invest) but must admit that I'm assuming here. Pillar 3, incidentally called pillar 3 (3. Säule) is not mandatory. You can pay a maximum yearly amount into a fund, a bank account or to an insurer (~ 7500$ if employed ~ 38000$ if you're not part of a pillar 2 pension plan) and this amount is fully tax deductible. The string is that you can only get it out when you turn 60. There are ways to get the money out before that. Either when you invest in a house, or apartment or when you leave the country for good. Same goes for the pillar 2 assets accumulated. There's no such thing that a company can legally pull an Enron and invest the assets of their employees into their own company. I know that the Swiss system is considered excellent. The dutch system is considered even better, but I have no expertise to discuss it.
- chrismealy 15y ago
  60% is the magic number from Reinhart and Rogoff. Their work is flawed because they failed to distinguish between public debt borrowed in a country's own currency versus other currencies.
kreek 15y ago
"By the end of 2011, deficit spending on OEF/OIF (Afghanistan/Iraq) will have raised the ratio of debt to GDP by about 10 percentage points, or between a quarter and a third of the total increase. By 2020, the increase will be 20 percentage points if war spending and the rest of the budget continue as forecast" http://costsofwar.org/article/macroeconomic-impact-military-spending http://costsofwar.org/article/macroeconomic-impact-military-...
- oelewapperke 15y ago
  Which is still barely 20% of the social programs spending. We'd have to start another 8 wars of a similar size to reach that cost. Also : dropping defense to 0 is not enough by far. Dropping 1 of the 2 major social programs (and ObamaCare), however, does solve the problem. (the problem here is not that current spending for social security is so much more than defense spending, it's that projected deficits and hidden liabilities are too large, and thus these programs will double their spending in about 10 years. Anyone can make the simple observation : we can't pay for that) And there's no choice : whether or not you castrate defense spending, ObamaCare has to die, and either social security or medicare/medicaid has to go. Choosing is going to be ugly.
smogzer 15y ago
It's about survival. For politics:If everything is well we wouldn't need politics to make it right. Therefore politics must assure that everything is screwed for them to prosper. For banksters: they must assure that that everyone is indebted and even entire countries in order for them to survive. Don't expect solutions from those that thrive on the misery of others.
tomp 15y ago
Some interesting data points in there... Japan, government dept is 200% GDP? Never knew that... Belgium 100.7%? France 94.1%? That's not much better than Ireland (102.4%) and Portugal (103.1%)! Obviously some countries are much better at managing their debts than others (or at least their public image). Can we learn anything?
- zipdog 15y ago
  Japan has had high debt for a couple of decades, and is an interesting example. From what I understand the debt has really hampered growth. However, the debt is mostly held by the Japanese (I think), which is a much different situation because the money is just circulating from the general population to those in the population holding the debt, rather than being sent overseas to foreign creditors.
  - watchandwait 15y ago
    Japan is about to hit the wall though. They've lived off of a culture of savings, and those savers are all retiring, so Japan is going to see a reduced ability to finance its debt domestically. (This is also already beginning to impact the U.S. ability to borrow from Japan). Japan's house of cards is going to collapse in the next decade, and Japan's long slide of mismanagement into the second tier of the global economy will be complete. In just a generation they will have fallen from first place to trailing Korea.
- tybris 15y ago
  I've heard a suggestion to change PIGS to BIGPIGS (Belgium, Ireland, Great-Britain, Portugal, Italy, Greece, Spain). Until we get some extra vowels, we can let France off the hook.
eftpotrm 15y ago
FWIW, my understanding is that the British government figure is significantly and artificially inflated by having had to bail out Northern Rock in the banking crisis - it ended up meaning that the balance sheets of any NR depositors technically counted against the national debt, but that's hardly what most actually mean when they're investigating the national debt.
- arethuza 15y ago
  My initial reaction was "surely the NR liabilities can't be that much" - turns out they are £110 billion out of a total UK public sector net debt of £910.1 billion - which is a pretty big chunk! http://www.economicshelp.org/blog/uk-economy/uk-national-debt/ http://www.economicshelp.org/blog/uk-economy/uk-national-deb... http://www.heraldscotland.com/northern-rock-could-be-left-off-the-balance-sheet-1.845546 http://www.heraldscotland.com/northern-rock-could-be-left-of...
  - eftpotrm 15y ago
    Exactly, and will vanish overnight when Northern Rock is later sold, hence why they're not really a part of the national debt in any real sense.
protomyth 15y ago
Per historical data (one link here: http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-fraction-of-gdp/ http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-f... ), the US income from taxes hovers between 15% - 20% GDP. This holds with wildly varying tax policies.
chrismealy 15y ago
What happens in 2026? Is there a debt collector from a foreign planet coming then? By definition government debt equals net private savings (+/- exports). If the private sector wants a surplus you have to have a government debt. The alternative, as seen on the chart, is to replace net private savings with welfare state programs.
- zipdog 15y ago
  >If the private sector wants a surplus you have to have a government debt. This seems to ignore the ability to add value. The sum of material possessions is determined by the amount the market would be willing to pay, but the market doesn't have to actually enact every transaction for that value to hold. So if I build a house, I still have the surplus value of a new house, even though the exchange of goods was only for raw materials. I get that technically money is either in the hands of the government or the people (or foreign entities) and so debt and surplus must match between these two (three) groups, but that does seem overly simplistic given that the worth of our material possessions increases as we had value to raw materials.
- tbrownaw 15y ago
  By definition government debt equals net private savings (+/- exports). This is bogus. Sure it's technically true, but it doesn't actually mean anything. If the private sector wants a surplus you have to have a government debt. There is no such thing as what's meant by a "surplus" here. There are two things that can be considered "saving". There is stockpiling useful things for your own later use, and there is collecting rights to other people's future work (which can be approximated by stockpiling your chosen medium of exchange). But when you consider net "savings" of an entire economy, rather than individual "savings" of individual people, there is no "other people" to collect future work from. The government can create more medium-of-exchange for people to stockpile, and it's recorded as a debt of the government, but it's entirely meaningless because there's nothing to exchange it for. The only way to have net savings -- deferring the benefits of current work -- is to stockpile those benefits in a warehouse somewhere for later retrieval.
zipdog 15y ago
Australia is an interesting point on that chart since less than ten years ago its debt was around the same as Spain or Canada. I think it had a minerals boom that brought in large surpluses.
- Estragon 15y ago
  It also had really good governance for a while, under Rudd. Shame the mining companies had to take him out.
Derbasti 15y ago
I don't get government debt. How can every country be indebted? Don't mutual debts cancel each other out? How can the whole world be in debt? Whom do they owe that money? Whom do they pay the interest? Does a government debt mean that each citizen has a debt? Does it mean the government owes that money to its citizens? If anyone has insight in this, please enlighten me!
- mkr-hn 15y ago
  Government debt works like any other investment. http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm http://www.treasurydirect.gov/indiv/products/prod_tbills_gla... Debt serves an important function in modern economies as a safe place to put money. That's why this debt ceiling showdown is a problem. Investors will take their money somewhere else instead of putting it in T-bills if they think the US might default. Trillions in debt looks ominous, but it represents the trust (and wealth) of thousands of investors.
  - watchandwait 15y ago
    Safe place? Ask investors in Argentine, Russian, and Greek government debt about that. The U.S. government is already working to cheat its debt investors by repaying them with devalued printed paper. One could argue that U.S. government debt is one of the least safe investments out there. You will get repaid, but it will be in devalued currency. That dollar you invested 5 years ago, for example, only buys about 1/3 as much oil as it did when you invested it. That is a catastrophic loss.
    - mkr-hn 15y ago
      Traditionally safe. The recent (past 30 or so years) unwillingness of the congress to invest that money into maintaining growth (things like infrastructure maintenance/improvement--"pork projects" as people like to call them) has started to compromise that. Corporate lobbyists haven't helped much either.
      - 15y ago
jeffchuber 15y ago
Government debt, while not intrinsically bad, is completely unsustainable. I imagine the US is planning the dollar will fall and it's debts will be essentially leveled. Maybe the US should adopt BTC?
tybris 15y ago
Rich countries don't pay off debt, they inflate it away. One of the main reason for European countries to adopt the euro was to get a piece of the reserve currency pie, allowing more debt to be eliminated without severe economic repercussions. Unfortunately, they hit a road block in the Mediterranean, where, due to poor fiscal management, more inflation would lead to economic disasters threatening the stability of the euro. Meanwhile, the U.S. cannot afford much inflation at the moment, since it would threaten the position of the dollar as reserve currency in favour of the euro. Worse yet, they have their biggest creditor breathing in their neck with increasing economic and military power, who would not be pleased by inflationary measures. Thus begins the biggest poker game of all, in which the U.S. suddenly cares about military spending and is trying to get Europe to spend itself into an inflationary cycle. Meanwhile, Europe is trying to prevent that through severe budget cuts. Ultimately though, neither can get rid of their debt without inflation so both taking inflationary measures is the only logical outcome. China and other countries heavily invested in euros (e.g., Russia) and dollars (e.g., Japan) will not be pleased, but ultimately their wealth is heavily dependent on the economic well-being of their biggest lenders and trading partners. There will be few winners in this game.
- danielsoneg 15y ago
  > The U.S. cannot afford much inflation at the moment, since it would threaten the position of the dollar as the reserve currency in favour of the euro. Not buying that, especially not at the moment - Greece is doing far more damage to the Euro as a reserve currency than anything the US could do to the dollar before August 2nd, and if Greece gets its house in order, there's still Portugal waiting in the wings. What's more, the US has an inflation rate right now that's practically nil, and I suspect China's interest is in the US spending again - their bond holdings exist for the sake of currency control, not as a legitimate investment.
  - tybris 15y ago
    Obviously the euro zone is bad, but I think you're overestimating how healthy the dollar zone is. Oil supplies are dwindling, the weapons industry is losing importance, the financial industry is not what it used to be, the car industry is no longer competitive, few major infrastructure projects are being undertaken, IT is one of the few industries that is going strong, but it contributes relatively little. Europe has a healthy, productive economy to back up the euro and it's a threat to the dollar.
hardtke 15y ago
This chart is misleading with regards to the current US debt. It claims our gross government debt in 93.6% of GDP. There are two types of government debt -- debt held by the public (currently about 60% of GDP) and intergovernmental debt (the social security trust fund, medicare trust fund, highway trust fund, etc.). The latter debt can be wiped away by act of Congress -- they simply need to change the payout formula such that this debt remains as pieces of paper in a filing cabinet in West Virginia. We don't even pay interest on this debt -- we send more pieces of paper to the filing cabinet. Our real debt is not at crisis levels yet.

58 points by CaptainZapp 15y ago

rvkennedy 15y ago

First thought: the Swedes are doing well! Why is 60% of GDP the target? What does this do?

CaptainZapp 15y ago
From the explanation : The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026. This is around the level considered healthy and is also the ratio set by the widely ignored Maastricht agreement, which is meant to govern debt in the European Union. It is not pretty.
lucasjung 15y ago
My understanding is that Sweden has drawn a significant portion of its revenues from North Sea oil, but that they are anticipating significant declines in production (and therefore revenue). They are preparing for this by grdually restructuring (read: cutting) government services and benefits to fit their anticipated revenue, with the added benefit that doing so in advance allows them to build up a decent nest-egg. In other words, they are doing something incredibly rare for a government: budgeting in a responsible and rational manner.
- arethuza 15y ago
  I didn't know that Sweden had any oil - unlike Norway next door that is practically floating on the stuff.
- mseebach 15y ago
  I couldn't find anything definitive on Google, but I don't think Sweden has that much oil, and if they do, it's not in the North Sea (which isn't bordering Sweden). (You might have meant to refer to Norway or Denmark which fits your description quite well)
- RuadhanMc 15y ago
  Pretty sure that you are thinking of Norway. Sweden doesn't do oil in any serious way. Sweden is trying to be oil-free. http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Society http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Socie... According to Wikipedia (http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden) Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. That's quite a nice spread.
  - bh42222 15y ago
    Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. And ABBA. (I'm only half joking the royalties on their music equal quite a few Volvos.)
    - bh42222 15y ago
      Replying to myself because someone on the Internet is wrong! ... between 1974 and 1982,they earned nearly twice the GNP of Sweden From: http://www.artistfacts.com/detail.php?id=322 http://www.artistfacts.com/detail.php?id=322
      - RuadhanMc 15y ago
        That is pretty staggering... This too: "When ABBA was active, only the Volvo car company made more money in Sweden.".
- Tuna-Fish 15y ago
  Sweden has practically no oil production at all, and never had any. The Scandinavian country with large oil reserves is Norway. What you are talking about doesn't even describe Norway properly -- they have largely not spent the revenue they got from oil. Instead, it has been collected into a sovereign wealth fund. At present, the fund holds some $100 000 for every Norwegian. Future decline of oil profits will be covered by the investment income from the fund. There hasn't been any cutting of government services to fit revenues -- there hasn't been any need to. Sweden, like the other Scandinavian countries, has held a responsible and rational budget for most of it's existence as a democratic country. So while it might be incredibly rare for governments worldwide, for some reason it seems that the Scandinavians can make the idea of a well-run welfare state work. I have yet to figure out why they can do it and most of the rest of the world seemingly can't.
  - furyg3 15y ago
    The Norway situation you describe is correct. Normally an influx of wealth from oil (or other natural resources, even humanitarian aid) will suppress the country's abilities to be competitive in manufacturing or other (non-oil) sectors. It's often called a "Resource Curse" or "Dutch Disease". Avoiding the curse requires not to spending the oil money directly... and instead to invest it and spend only the interest.
  - henrikschroder 15y ago
    > I have yet to figure out why they can do it and most of the rest of the world seemingly can't. It helps a lot to have a small country with an ethnically homogenous population, extremely low corruption, high tax morale, and high public trust of government offices and institutions.
    - bh42222 15y ago
      It helps a lot to have a small country Maybe, or a big but dictatorial country like China. an ethnically homogenous population Care to elaborate? Would you consider countries such as Switzerland, Canada, Taiwan, and Singapore ethnically homogeneous? extremely low corruption, high tax morale, and high public trust of government offices and institutions. Chicken and egg problem - High tax compliance and trust in government come from having a reasonable tax rate from which you get a lot of effective government services. Low corruption is a pre-requisite for trust in government institutions. I bet what also helps is not having a culture of cousin marriage, that seems to create a culture where is much more difficult to have any kind of trust with people outside of your clan. I think the modern well functioning democracy is to a very large degree a result of complex game theory. You don't have to look back much more the 2 centuries, to see thousands of years of European history that's full of corruption, lawlessness, crushing tax rates, all the typical modern day 3rd world problems and then some. If just being Swedish led to modern Sweden, Swedish history would be a lot less interesting. For one, it would almost certainly be entirely Viking free.
mixmax 15y ago
The Swedes had a serious financial crisis in the mid 90's and learnt their lesson. They've been running a sound fiscal policy ever since.
- arethuza 15y ago
  Maybe the Greeks should invite the Swedes to run their country for them!
  - bh42222 15y ago
    Well.... the EU is sort of, kind of, like that. The treaty of Maastricht, EU regulations superseding national regulations, it's all supposed bring rich north western European style government to the poorer more chaotic south and east parts of Europe. <sarcasm>And it's working out great!</sarcasm>
  - henrikschroder 15y ago
    That wouldn't help, the underlying problem is that the general tax morale is much lower in Greece compared to Sweden.
guelo 15y ago
The Swedes just used basic Keynesian economics to fight the recession. They went into the recession with the budget in good shape, unlike the Bush approach of deficits and expensive wars. Then when the recession hit their huge welfare system kicked into high gear plus they added a stimulus of tax cuts and infrastructure projects, unlike the Obama approach of no net stimulus when you add the smallish federal stimulus minus state government cuts. Also their central bank cranked up QE higher than our Fed, and their politicians didn't run around freaking out about "debasing the currency". Read about it here http://www.washingtonpost.com/business/economy/five-economic-lessons-from-sweden-the-rock-star-of-the-recovery/2011/06/21/AGyuJ3iH_story.html?nav=emailpage http://www.washingtonpost.com/business/economy/five-economic...
- pragmatic 15y ago
  Fantastic point. I don't think enough people understand that Keynes doens't work if you are running a massive deficit all the time. In good times you _need_ to be solvent so that in bad times, extra gov't spending will actually have an effect. The US is not able to implement Keynesian policies b/c we borrow and spend constantly.
  - watchandwait 15y ago
    None of the American "Keynesians" calling for deficit spending today called for a balanced budget 5 years ago during the boom. I'd argue there are no true Keynesians, just politicians looking for an excuse to continue spending.
    - guelo 15y ago
      If you didn't hear liberals complaining that we couldn't afford the wars and Bush's tax cuts then you weren't paying attention.
- beatpanda 15y ago
  In fairness, that wasn't the "Obama approach". The stimulus was whittled down by the Congress.
larrik 15y ago
Sweden also seems to offer free college tuition, even for advanced degrees. Coincidence? Maybe... It's too bad you apparently can go to jail there if you have sex with someone, they regret it, and then a politician wants to make that a crime afterwards.
- Vivtek 15y ago
  ... and you refuse to comply with requests for investigation and flee the country.
  - marshray 15y ago
    If you're referring to Assange, as I understand it he'd already spoken with prosecutors once and they explicitly declined to prosecute. He was not under any order not to leave, so he didn't "flee the country". I would probably decline to return to some country for my transparently politically-motivated prosecution too.
icegreentea 15y ago
60% is the something like the global average.
pragmatic 15y ago
The Swedes are just ahead of the curve. They crashed in the 90's: http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden Then they reformed and recovered.
pragmatic 15y ago
Can any Swedes confirm/deny this summary of the pension plan: http://www.heritage.org/research/reports/2000/06/pension-reform-in-sweden-lessons-for-american-policymakers http://www.heritage.org/research/reports/2000/06/pension-ref... "Partial privatization. Workers can invest 2.5 percentage points of the 18.5 percent of their income that they must set aside for retirement. Soon workers will be able to choose the pension fund into which the funds will go." Any talk of even partial privatization in the US gets the old folks quite worked up. Political scare tactics and such. Plus a healthy (and not unwarranted) distrust of Wall Street that would love to get it's filthy paws on _even more_ retirement money.
- CaptainZapp 15y ago
  I can't speak for Sweden, but for Switzerland where your pension rests on three pillars. Two of them mandatory and one where you're free to invest, but receive tax benefits if you do: Pillar 1 is called AHV (AVS in French). This is the responsibility of the federal government and there are no plans to privatize this; ever. Since there is a maximum payout, which is quite low it has a certain wealth redistribution component. That is: When you make a lot of money you pay a percentage into the fund, which is a percentage of your earnings. So, a person making a lot of money pays more into it, but since the payout is capped at a fairly low level, he may get the same benefits as somebody who earned much less and thus payed much less into the fund Pillar 2 is the actual pension plan, which is mandatory. Every company must insure their employees and big companies run their own schemes. While those funds are privately run, there are strong restrictions in place how they can invest the money of their insureds. The difference to the AHV is that the payout depends on the amount you payed in over your lifetime as a worker. Payout is based on a formula and the age of retirement can be dependent on the insurer. Employees don't have a choice about which pension plan they have and there are differences in quality. I could imagine that the system in Sweden is comparable (private, but very restricted in how they invest) but must admit that I'm assuming here. Pillar 3, incidentally called pillar 3 (3. Säule) is not mandatory. You can pay a maximum yearly amount into a fund, a bank account or to an insurer (~ 7500$ if employed ~ 38000$ if you're not part of a pillar 2 pension plan) and this amount is fully tax deductible. The string is that you can only get it out when you turn 60. There are ways to get the money out before that. Either when you invest in a house, or apartment or when you leave the country for good. Same goes for the pillar 2 assets accumulated. There's no such thing that a company can legally pull an Enron and invest the assets of their employees into their own company. I know that the Swiss system is considered excellent. The dutch system is considered even better, but I have no expertise to discuss it.
chrismealy 15y ago
60% is the magic number from Reinhart and Rogoff. Their work is flawed because they failed to distinguish between public debt borrowed in a country's own currency versus other currencies.

kreek 15y ago

"By the end of 2011, deficit spending on OEF/OIF (Afghanistan/Iraq) will have raised the ratio of debt to GDP by about 10 percentage points, or between a quarter and a third of the total increase. By 2020, the increase will be 20 percentage points if war spending and the rest of the budget continue as forecast" http://costsofwar.org/article/macroeconomic-impact-military-spending http://costsofwar.org/article/macroeconomic-impact-military-...

oelewapperke 15y ago
Which is still barely 20% of the social programs spending. We'd have to start another 8 wars of a similar size to reach that cost. Also : dropping defense to 0 is not enough by far. Dropping 1 of the 2 major social programs (and ObamaCare), however, does solve the problem. (the problem here is not that current spending for social security is so much more than defense spending, it's that projected deficits and hidden liabilities are too large, and thus these programs will double their spending in about 10 years. Anyone can make the simple observation : we can't pay for that) And there's no choice : whether or not you castrate defense spending, ObamaCare has to die, and either social security or medicare/medicaid has to go. Choosing is going to be ugly.

smogzer 15y ago

It's about survival. For politics:If everything is well we wouldn't need politics to make it right. Therefore politics must assure that everything is screwed for them to prosper. For banksters: they must assure that that everyone is indebted and even entire countries in order for them to survive. Don't expect solutions from those that thrive on the misery of others.

tomp 15y ago

Some interesting data points in there... Japan, government dept is 200% GDP? Never knew that... Belgium 100.7%? France 94.1%? That's not much better than Ireland (102.4%) and Portugal (103.1%)! Obviously some countries are much better at managing their debts than others (or at least their public image). Can we learn anything?

zipdog 15y ago
Japan has had high debt for a couple of decades, and is an interesting example. From what I understand the debt has really hampered growth. However, the debt is mostly held by the Japanese (I think), which is a much different situation because the money is just circulating from the general population to those in the population holding the debt, rather than being sent overseas to foreign creditors.
- watchandwait 15y ago
  Japan is about to hit the wall though. They've lived off of a culture of savings, and those savers are all retiring, so Japan is going to see a reduced ability to finance its debt domestically. (This is also already beginning to impact the U.S. ability to borrow from Japan). Japan's house of cards is going to collapse in the next decade, and Japan's long slide of mismanagement into the second tier of the global economy will be complete. In just a generation they will have fallen from first place to trailing Korea.
tybris 15y ago
I've heard a suggestion to change PIGS to BIGPIGS (Belgium, Ireland, Great-Britain, Portugal, Italy, Greece, Spain). Until we get some extra vowels, we can let France off the hook.

eftpotrm 15y ago

FWIW, my understanding is that the British government figure is significantly and artificially inflated by having had to bail out Northern Rock in the banking crisis - it ended up meaning that the balance sheets of any NR depositors technically counted against the national debt, but that's hardly what most actually mean when they're investigating the national debt.

arethuza 15y ago
My initial reaction was "surely the NR liabilities can't be that much" - turns out they are £110 billion out of a total UK public sector net debt of £910.1 billion - which is a pretty big chunk! http://www.economicshelp.org/blog/uk-economy/uk-national-debt/ http://www.economicshelp.org/blog/uk-economy/uk-national-deb... http://www.heraldscotland.com/northern-rock-could-be-left-off-the-balance-sheet-1.845546 http://www.heraldscotland.com/northern-rock-could-be-left-of...
- eftpotrm 15y ago
  Exactly, and will vanish overnight when Northern Rock is later sold, hence why they're not really a part of the national debt in any real sense.

protomyth 15y ago

Per historical data (one link here: http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-fraction-of-gdp/ http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-f... ), the US income from taxes hovers between 15% - 20% GDP. This holds with wildly varying tax policies.

chrismealy 15y ago

What happens in 2026? Is there a debt collector from a foreign planet coming then? By definition government debt equals net private savings (+/- exports). If the private sector wants a surplus you have to have a government debt. The alternative, as seen on the chart, is to replace net private savings with welfare state programs.

zipdog 15y ago
>If the private sector wants a surplus you have to have a government debt. This seems to ignore the ability to add value. The sum of material possessions is determined by the amount the market would be willing to pay, but the market doesn't have to actually enact every transaction for that value to hold. So if I build a house, I still have the surplus value of a new house, even though the exchange of goods was only for raw materials. I get that technically money is either in the hands of the government or the people (or foreign entities) and so debt and surplus must match between these two (three) groups, but that does seem overly simplistic given that the worth of our material possessions increases as we had value to raw materials.
tbrownaw 15y ago
By definition government debt equals net private savings (+/- exports). This is bogus. Sure it's technically true, but it doesn't actually mean anything. If the private sector wants a surplus you have to have a government debt. There is no such thing as what's meant by a "surplus" here. There are two things that can be considered "saving". There is stockpiling useful things for your own later use, and there is collecting rights to other people's future work (which can be approximated by stockpiling your chosen medium of exchange). But when you consider net "savings" of an entire economy, rather than individual "savings" of individual people, there is no "other people" to collect future work from. The government can create more medium-of-exchange for people to stockpile, and it's recorded as a debt of the government, but it's entirely meaningless because there's nothing to exchange it for. The only way to have net savings -- deferring the benefits of current work -- is to stockpile those benefits in a warehouse somewhere for later retrieval.

zipdog 15y ago

Australia is an interesting point on that chart since less than ten years ago its debt was around the same as Spain or Canada. I think it had a minerals boom that brought in large surpluses.

Estragon 15y ago
It also had really good governance for a while, under Rudd. Shame the mining companies had to take him out.

Derbasti 15y ago

I don't get government debt. How can every country be indebted? Don't mutual debts cancel each other out? How can the whole world be in debt? Whom do they owe that money? Whom do they pay the interest? Does a government debt mean that each citizen has a debt? Does it mean the government owes that money to its citizens? If anyone has insight in this, please enlighten me!

mkr-hn 15y ago
Government debt works like any other investment. http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm http://www.treasurydirect.gov/indiv/products/prod_tbills_gla... Debt serves an important function in modern economies as a safe place to put money. That's why this debt ceiling showdown is a problem. Investors will take their money somewhere else instead of putting it in T-bills if they think the US might default. Trillions in debt looks ominous, but it represents the trust (and wealth) of thousands of investors.
- watchandwait 15y ago
  Safe place? Ask investors in Argentine, Russian, and Greek government debt about that. The U.S. government is already working to cheat its debt investors by repaying them with devalued printed paper. One could argue that U.S. government debt is one of the least safe investments out there. You will get repaid, but it will be in devalued currency. That dollar you invested 5 years ago, for example, only buys about 1/3 as much oil as it did when you invested it. That is a catastrophic loss.
  - mkr-hn 15y ago
    Traditionally safe. The recent (past 30 or so years) unwillingness of the congress to invest that money into maintaining growth (things like infrastructure maintenance/improvement--"pork projects" as people like to call them) has started to compromise that. Corporate lobbyists haven't helped much either.
    - 15y ago

jeffchuber 15y ago

Government debt, while not intrinsically bad, is completely unsustainable. I imagine the US is planning the dollar will fall and it's debts will be essentially leveled. Maybe the US should adopt BTC?

tybris 15y ago

Rich countries don't pay off debt, they inflate it away. One of the main reason for European countries to adopt the euro was to get a piece of the reserve currency pie, allowing more debt to be eliminated without severe economic repercussions. Unfortunately, they hit a road block in the Mediterranean, where, due to poor fiscal management, more inflation would lead to economic disasters threatening the stability of the euro. Meanwhile, the U.S. cannot afford much inflation at the moment, since it would threaten the position of the dollar as reserve currency in favour of the euro. Worse yet, they have their biggest creditor breathing in their neck with increasing economic and military power, who would not be pleased by inflationary measures. Thus begins the biggest poker game of all, in which the U.S. suddenly cares about military spending and is trying to get Europe to spend itself into an inflationary cycle. Meanwhile, Europe is trying to prevent that through severe budget cuts. Ultimately though, neither can get rid of their debt without inflation so both taking inflationary measures is the only logical outcome. China and other countries heavily invested in euros (e.g., Russia) and dollars (e.g., Japan) will not be pleased, but ultimately their wealth is heavily dependent on the economic well-being of their biggest lenders and trading partners. There will be few winners in this game.

danielsoneg 15y ago
> The U.S. cannot afford much inflation at the moment, since it would threaten the position of the dollar as the reserve currency in favour of the euro. Not buying that, especially not at the moment - Greece is doing far more damage to the Euro as a reserve currency than anything the US could do to the dollar before August 2nd, and if Greece gets its house in order, there's still Portugal waiting in the wings. What's more, the US has an inflation rate right now that's practically nil, and I suspect China's interest is in the US spending again - their bond holdings exist for the sake of currency control, not as a legitimate investment.
- tybris 15y ago
  Obviously the euro zone is bad, but I think you're overestimating how healthy the dollar zone is. Oil supplies are dwindling, the weapons industry is losing importance, the financial industry is not what it used to be, the car industry is no longer competitive, few major infrastructure projects are being undertaken, IT is one of the few industries that is going strong, but it contributes relatively little. Europe has a healthy, productive economy to back up the euro and it's a threat to the dollar.

hardtke 15y ago

This chart is misleading with regards to the current US debt. It claims our gross government debt in 93.6% of GDP. There are two types of government debt -- debt held by the public (currently about 60% of GDP) and intergovernmental debt (the social security trust fund, medicare trust fund, highway trust fund, etc.). The latter debt can be wiped away by act of Congress -- they simply need to change the payout formula such that this debt remains as pieces of paper in a filing cabinet in West Virginia. We don't even pay interest on this debt -- we send more pieces of paper to the filing cabinet. Our real debt is not at crisis levels yet.