Monday, October 10, 2005

Japanese vs. US National Debt

I had always thought the US National Debt was huge and was surprised to see that the Japanese Debt was almost as large in absolute terms and over twice as large in per capita terms (Japan has about 40% the population as the US).

The US National Debt Clock has us at $7.987 trillion in debt or $26,800 per capita.

Japan comes in at $7.1 trillion (795.8 trillion yen) or $55,900 (6.24 million yen) per person (via Yahoo News). Good thing they have those miniscule interest rates (1.37% 10 yr, .02% 3 month).


Anonymous said...

Another large difference though is that the Japanese debt is approximately 90% domestically owned, while the US debt is approximetely 30+% foreign owned. This also gives more leverage for Japan. Also, Japan has a current account surplus, while the US has a current account debt. This means that Japan as a nation is earning income while the US is losing income. This makes the US debt picture more vulnerable.

Fat Knowledge said...

Good points.

Anonymous said...

Tale of Two Debts/Deficits: Japan and the U.S. (October 9, 2006) by Charles Hugh Smith

The not-so-visible difference between Japan's debt and the U.S. debt is that the Japanese are prodigious savers, and can fund their own debt internally. In other words, as long as the Japanese save 20% of their national income, then their individuals, insurance companies and banks can buy their government's 34 trillion yen in bonds and cover the annual deficit more or less indefinitely.

But here in the U.S. we are saving -1% --yes, a negative savings rate for the first time since the Great Depression. We don't generate sufficient savings to fund our own government's deficits. We rely on foreigners to buy at least half of all outstanding Treasury bonds-- over $2 trillion, not counting OPEC money which flows in from London or the Caribbean and thus isn't counted as central bank ownership.

Bottom line: the Japanese can continue running such staggering deficits because they can fund them with their own savings. The U.S. does not have that luxury. So what happens if for political or financial reasons, foreign investors and central banks stop buying U.S. bonds? Interest rates will have to rise to the point that someone steps up and willingly slaps down their cash for a fixed rate of return from the U.S. Treasury.

Fat Knowledge said...

Good point. But, I can't believe that having a large gov't debt is a good thing even if it is domestically owned. The Japanese have had horrible economic growth over that last 10 years and I wonder if that would have changed if they had taken care of their debt issue.

richnorwood35 said...
This comment has been removed by the author.
Anonymous said...

"The US National Debt Clock has us at $7.987 trillion in debt or $26,800 per capita."

Uhm, the TRUE US National Debt, counting unfunded
obligatons, is closer to $80 trillon, or about
$250k per capita. Lets get real, shall we?

sd said...

Debt is money that has already been spent. Unfunded obligations are commitments to spend money in the future. The two are not the same. Counting unfunded obligations as part of the national debt is truly disingenuous. Do you really believe Americans will accept a bill of $250k per capita just to continue trying to support unfunded obligations? As you said, let's get real. America is going to renege on those unfunded obligations (and it will probably default on a good portion of the accumulated national debt as well).

Anonymous said...

does this include credit card debt?

Anonymous said...

no..we have about 8 trillion in federal public debt. then we owe roughly 4 trillion to the Social Security and Medicare trust funds. Then state and local govts have about 2 trillion in debt. households have about 12 trillion in debt(roughly 10 trillion in mortgage debt and 2 trillion in cc, auto student loan debt, etc) Then non bank corporations have about 10 trillion in debt. And if you count the financial institutions debt of 17 trillion, total US public/private debt is about 50 trillion dollars.

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