A topic every financier loves to talk about is debt. The topic elicits such passion from all sides of the issue. Overall, one side of the debate see the continued overexpansion of debt as something that could spell doom for the global economy – eventually. On the other end of the discussion are observers who view debt as a necessary evil for current growth. They know debt is a problem but see growth now as more important that growth at some unknown period in the future.
In all the discussions, one thing becomes clear among all debating camps – debt will eventually be a problem.
The Debt Picture, Looking at the Highest Debt to GDP Levels in Recent History
Here is a look at the debt picture. Before viewing the figure below, which country would you guess has had the highest debt per GDP (Gross Domestic Product) in its history?
Would you put a European country as the biggest problem child in history? Taking shots at European countries for their debt is a beloved pastime of financiers.
Perhaps an African country shows up on top? Default in African countries is a bigger problem that it has been in the western world. Perhaps some countries took on way more debt than they could swallow?
Could the United States be on top? The Americans certainly love debt.
What about an Asian country? China is booming – perhaps it has had the highest historical debt to GDP measure of any country? Perhaps Japan is the biggest offender. Policymakers in Japan have struggled to generate growth, and perhaps part of that is their enormous debt loads.
The chart on the previous page goes from light yellow to dark brown. Countries with a dark brown coloring are the countries have had the highest historical debt to GDP levels. The countries with the lowest “highest” historical debt to GDP are lightly colored yellow.
Curiously, the most highly indebted country is Liberia. The Liberia debt burden was once 721% of GDP.
Which country is next in line? Iraq. The war-torn country once had a debt to GDP burden of 343% of GDP.
Rounding out the countries with the highest debt to GDP history are Sao Tome (309% of GDP), Mauritania (280% of GDP), and Zambia (278% of GDP).
The Least Historical Indebted Figures
What about the lowest indebted countries? Which countries have the lowest “highest” debt to GDP in its history?
The five lowest indebted countries are Brunei (3.2% of GDP), Estonia (10.7% of GDP), Kosovo (16.6% of GDP), Cuba (21.1% of GDP), and Libya (21.2% of GDP). A complete listing of the highest historical debt to GDP follows at the end of this article.
Back to the Real Questeion, Why Does Debt Matter for Gold?
The real question here is – why does debt matter for gold?
The answer is easy. Large debt levels could eventually lead to high inflation. Unwise debt levels could also lead to either default, restructuring, or a recession. In all of these cases, the hedge against a debt problem is gold. Gold protects against inflation. Gold acts as a hedge against an economy turning south. Overall, gold is a asset that covers some of the downside risk for other asset classes.
Country |
Highest |
Liberia |
721 |
Iraq |
343 |
Sao Tome and Principe |
309 |
Mauritania |
280 |
Zambia |
278 |
Republic of the Congo |
270 |
Equatorial Guinea |
261 |
Japan |
253 |
Sierra Leone |
247 |
Jordan |
220 |
Myanmar |
216 |
Jamaica |
212 |
Guinea Bissau |
210 |
Congo |
204 |
Kuwait |
203 |
Serbia |
201 |
Syria |
190 |
Lebanon |
183 |
Greece |
181 |
Burundi |
173 |
Nicaragua |
169 |
Argentina |
167 |
Moldova |
159 |
Zimbabwe |
148 |
Sudan |
139 |
Mozambique |
138 |
Guyana |
136 |
Belgium |
133 |
Italy |
132 |
Portugal |
131 |
Cameroon |
131 |
Cape Verde |
130 |
Togo |
124 |
Kyrgyzstan |
122 |
Ireland |
120 |
Malawi |
120 |
Rwanda |
120 |
Bhutan |
119 |
United States |
119 |
Morocco |
118 |
Gambia |
117 |
Panama |
116 |
Algeria |
116 |
Suriname |
115 |
Guinea |
113 |
Singapore |
112 |
Ghana |
112 |
Madagascar |
112 |
Tajikistan |
111 |
Sri Lanka |
109 |
Cyprus |
108 |
Angola |
104 |
Saudi Arabia |
104 |
Egypt |
102 |
Canada |
101 |
Spain |
100 |
Central African Republic |
97.4 |
France |
97 |
Yemen |
96.1 |
Uruguay |
96.1 |
Israel |
96 |
Mongolia |
95.73 |
Iceland |
94.7 |
Russia |
92.1 |
Euro Area |
91.9 |
Djibouti |
90.7 |
Bahrain |
90.6 |
Chad |
90.2 |
Gabon |
90.1 |
Lesotho |
88.66 |
Montenegro |
88.3 |
Pakistan |
87.9 |
Indonesia |
87.43 |
Belize |
87.1 |
Seychelles |
87 |
European Union |
86.5 |
Ecuador |
85.5 |
United Kingdom |
85.3 |
Austria |
84.6 |
Albania |
84.6 |
Hungary |
84.3 |
India |
84.2 |
Ivory Coast |
84.2 |
Croatia |
84 |
Slovenia |
82.6 |
Laos |
81.7 |
Ukraine |
81 |
Germany |
81 |
Malaysia |
80.74 |
Bolivia |
78.5 |
Kenya |
78.3 |
Comoros |
78.1 |
Bulgaria |
77.6 |
Turkey |
76.1 |
Nigeria |
75 |
Philippines |
74.9 |
Qatar |
74.4 |
Brazil |
74.04 |
Bahamas |
73.7 |
Netherlands |
73.5 |
Senegal |
72.6 |
Sweden |
72.4 |
Venezuela |
72.3 |
Malta |
72 |
Uganda |
71.5 |
Tunisia |
70.1 |
Costa Rica |
69.66 |
Nepal |
69.5 |
Honduras |
68.06 |
Paraguay |
67 |
Niger |
66.5 |
El Salvador |
65.52 |
Eritrea |
65.2 |
Mauritius |
65 |
Finland |
63.5 |
Haiti |
62 |
Vietnam |
61.5 |
Uzbekistan |
59.38 |
Trinidad and Tobago |
59.2 |
Benin |
58.2 |
Denmark |
58.1 |
Thailand |
57.8 |
Macedonia |
57.2 |
Fiji |
56.2 |
Bosnia and Herzegovina |
56.04 |
Poland |
55.7 |
New Zealand |
54.8 |
Slovakia |
54.7 |
Norway |
53.7 |
Maldives |
53.7 |
South Africa |
53.1 |
Azerbaijan |
51.1 |
Colombia |
50.6 |
Guatemala |
50.45 |
Tanzania |
50.2 |
Bangladesh |
50 |
Dominican Republic |
49.12 |
Switzerland |
48.9 |
Mexico |
48.2 |
China |
47.6 |
Latvia |
47.4 |
Peru |
47.1 |
Papua New Guinea |
46.9 |
Armenia |
46.19 |
Czech Republic |
44.9 |
Georgia |
43.9 |
Burkina Faso |
43.4 |
Cambodia |
43.1 |
Lithuania |
42.6 |
Iran |
42.3 |
Australia |
41.9 |
Ethiopia |
41.8 |
Namibia |
41.5 |
Oman |
39.9 |
Turkmenistan |
39.2 |
Romania |
39.1 |
Hong Kong |
38.4 |
South Korea |
38.3 |
Chile |
37.4 |
Taiwan |
34 |
Belarus |
31.9 |
Botswana |
27.5 |
Palestine |
26.36 |
Swaziland |
26.16 |
Cayman Islands |
24.5 |
United Arab Emirates |
24.1 |
Luxembourg |
23.7 |
Afghanistan |
23 |
Kazakhstan |
21.9 |
Libya |
21.2 |
Cuba |
21.1 |
Kosovo |
16.63 |
Estonia |
10.7 |
Brunei |
3.2 |