We all like to spend money we don’t have. Credit card payments, cash advances, auto loans, and mortgages are just a few examples. But, it seems that our governments and world leaders are even more guilty of this habit.
Interestingly enough, statistics show that the world’s wealthiest nations tend to acquire more debt. The largest economies on the planet are also the biggest borrowers. The US and China are the leaders when it comes to the global world debt of $257 trillion. Interestingly, credit card statistics show their citizens are keen on getting indebted, as 55% of Americans have some kind of credit card debt.
It seems that having a large GDP does not necessarily classify a country as “developed.” Just like for China, owing trillions of dollars from various creditors does not always indicate financial distress.
Japan, Italy, and France are all addicted to debt. Though, not because they have a low income, but because they have relatively easier access to credit. As they are among the top ten economies in the world, it’s not too hard to get a loan.
Prosperous nations are typically perceived as less risky borrowers as lenders have confidence in their bonds. As a result, the overall cost of borrowing money is low for wealthier countries.
Emerging economies, however, do not often receive the same treatment. Brazil, for instance, pays the most public debt interest in the world. In 2015, the country allotted more than 42% of its revenue to cover it.
Why do rich nations continue to borrow even if they have the money?
An advanced country may obtain debt to give its slowing economy an adrenaline shot. This allows for the continuity of government programs despite the decline in tax revenue due to recession. Another benefit of getting low-interest debt is avoiding raising taxes or enabling tax reductions to sustain the national budget without hurting economic growth.
The global debt is at an all-time high, and experts are unable to predict whether its continued rise will lead the most indebted countries to prosperity or poverty. With the ongoing pandemic, the situation is getting even more complicated as stock markets continue to report losses.
