The House of Cards of International Debt: On the Verge of Collapse?

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1 May 2024

On the global economic stage, a giant stands on a delicate balance, supported by paper pillars and shaky foundations. This colossus is international debt, a monster of colossal proportions whose weight threatens to shake the markets and send the world economy into the abyss.

Imagine a house of cards, where each card represents billions of dollars owed between nations. Every move in this financial game could be the last gasp before a catastrophic crash. But how did we reach this critical point?

The reasons are multiple and complex. Since the 2008 financial crisis, countries have resorted to massive borrowing to keep their economies afloat. However, this excessive borrowing has created a dangerous web of dependency, where a single wrong move could trigger a chain reaction of defaults and bankruptcies.

China, for example, has emerged as one of the largest international lenders, spreading its financial tentacles to developing countries around the world. However, their growing influence has also raised concerns about the ability of these nations to pay their debts without falling into the Chinese debt trap.

On the other hand, developed countries such as the United States and Japan face alarming levels of public debt, which threaten to undermine their long-term economic stability. The COVID-19 pandemic has only exacerbated this crisis, forcing governments to spend trillions on economic stimulus and rescue measures.

In this game of risk and reward, international investors are watching cautiously, aware that one wrong move could unleash a financial storm of epic proportions. Markets are on high alert, prepared to react to any sign of weakness in the system.

The countries with the highest debt in the world vary depending on the measure used to evaluate it. Debt can be classified into public debt (what the government has) and external debt (what the country has with other countries or international institutions).

Here is a list of the countries with the highest levels of public debt:

Japan: Japan has the largest public debt in the world in absolute terms. Its debt is significantly high relative to its GDP.
United States: Although the United States has a large and diversified economy, it also has considerable public debt, primarily due to its social and military spending programs.
China: Although China is known for its high foreign exchange reserves, it also has significant public debt, although to a lesser extent than some other countries.
Italy: The Italian economy has experienced economic and political problems that have contributed to a substantial public debt burden.

Greece: Greece faced a sovereign debt crisis in the 2010s, leading to a significant increase in its public debt.
Portugal: Like Greece, Portugal faced economic difficulties during the European financial crisis, resulting in an increase in its public debt.
Belgium: Despite being a small economy, Belgium has a relatively high public debt due to its decentralized political system and social welfare programs.