So... the US got downgraded by Standard & Poor.
Where does that leave us in relation to the rest of the world?
If you don't follow credit agency ratings regularly, the names of the ratings are likely to look a bit inflated. Every rating from the three major agencies- S&P, Moody's and Fitch- contain the letters A, B or C, often multiple times. Or at least, every rating that any country with a rating currently has.
For ease of comprehension, here, we're going to throw all those alphabet-block ratings in the garbage. We will rename them by their tier number: the best rating from a given agency will be reassigned the number 1, the second-best rating gets a 2, and so on. I figure that's something much more easily understandable. We'll also note the dividing line between "investment-grade" and "speculative-grade"; aka the junk bond line. For all three, the line happens to divide tiers 10 and 11.
As of today, here are the countries sitting on each rating. Note that not every country has ratings from all three, and some countries have no ratings at all.
In case you're wondering, one country currently matches the United States in all three ratings. That country is New Zealand.
STANDARD AND POOR'S
1- Australia, Austria, Canada, Denmark, Finland, France, Germany, Guernsey, Hong Kong, Isle of Man, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland, United Kingdom
2- Belgium, New Zealand, South Korea, United States
3- Abu Dhabi, Bermuda, Kuwait, Qatar, Slovenia, Spain
4- China, Japan, Saudi Arabia, Taiwan
5- Chile, Italy, Slovakia
6- Andorra, Czech Republic, Estonia, Israel, Malta, Oman, Ras Al-Khaimah, Trinidad and Tobago
7- Aruba, Botswana, Malaysia, Poland
8- Bahamas, Cyprus, Ireland, South Africa
9- Bahrain, Bulgaria, Kazakhstan, Lithuania, Mexico, Russia
10- Barbados, Brazil, Colombia, Croatia, Hungary, Iceland, India, Montserrat, Morocco, Panama, Peru, Portugal, Tunisia
----JUNK BOND LINE----
11- Azerbaijan, Indonesia, Latvia, Romania, Uruguay
12- Costa Rica, Egypt, Guatemala, Jordan, Macedonia, Montenegro, Philippines, Serbia, Turkey
13- Angola, Bangladesh, Cook Islands, El Salvador, Gabon, Mongolia, Venezuela, Vietnam
14- Albania, Bolivia, Bosnia/Herzegovina, Cambodia, Cape Verde, Dominican Republic, Georgia, Kenya, Mozambique, Nigeria, Papua New Guinea, Paraguay, Senegal, Sri Lanka, Suriname, Uganda, Ukraine, Zambia
15- Argentina, Belarus, Belize, Benin, Burkina Faso, Cameroon, Ghana, Honduras, Lenanon
16- Ecuador, Fiji, Grenada, Jamaica, Pakistan
20- Greece
MOODY'S
1- Australia, Austria, Canada, Denmark, Finland, France, Germany, Isle of Man, Luxembourg, Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, United Kingdom, United States
2- Belgium, Hong Kong
3- Bermuda, Italy, Japan, Kuwait, Qatar, Slovenia, Spain, United Arab Emirates
4- Cayman Islands, Chile, China, Macao, Saudi Arabia, Taiwan
5- Czech Republic, Estonia, Israel, Malta, Oman, Slovakia, South Korea
6- Botswana, Poland
7- Bahamas, Malaysia, South Africa
8- Bahrain, Cyprus, Lithuania, Mexico, Russia, Thailand, Trinidad and Tobago
9- Brazil, Bulgaria, Kazakhstan, Mauritius
10- Barbados, Colombia, Costa Rica, Croatia, Hungary, Iceland, India, Latvia, Panama, Peru, Romania, Tunisia
----JUNK BOND LINE----
11- Azerbaijan, Guatemala, Indonesia, Ireland, Morocco, Uruguay
12- Armenia, El Salvador, Jordan, Philippines, Portugal, Turkey
13- Angola, Bangladesh, Egypt, Georgia, Montenegro
14- Albania, Bolivia, Dominican Republic, Fiji, Lebanon, Mongolia, Papua New Guinea, Paraguay, Senegal, Sri Lanka, St. Vincent and the Grenadines, Suriname, Vietnam
15- Bosnia/Herzegovina, Cambodia, Honduras, Ukraine, Venezuela
16- Argentina, Belarus, Belize, Jamaica, Moldova, Nicaragua, Pakistan
17- Cuba
18- Ecuador
20- Greece
FITCH
1- Australia, Austria, Bermuda, Canada, Denmark, Finland, France, Germany, Luxembourg, Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, United Kingdom, United States
2- Belgium, Hong Kong, Spain
3- Abu Dhabi, Kuwait, Slovenia, South Korea
4- Chile, China, Italy, Japan, Saudi Arabia
5- Czech Republic, Estonia, Israel, Malta, Slovakia
6- Malaysia, Poland, Ras Al-Khaimah, San Marino, South Africa
7- Cyprus, Thailand
8- Bahrain, Iceland, Ireland, Lithuania, Mexico
9- Aruba, Brazil, Bulgaria, Croatia, Hungary, Kazakhstan, Latvia, Morocco, Namibia, Peru, Russia, Tunisia
10- Azerbaijan, Colombia, India, Panama, Portugal, Romania
----JUNK BOND LINE----
11- Costa Rica, Egypt, Guatemala, Indonesia, Macedonia, Philippines, Turkey, Uruguay
12- El Salvador, Lesotho, Nigeria
13- Angola, Armenia, Cape Verde, Gabon, Kenya, Serbia, Sri Lanka
14- Bolivia, Georgia, Ghana, Mongolia, Mozambique, Seychelles, Suriname, Venezuela, Vietnam, Zambia
15- Argentina, Benin, Dominican Republic, Lebanon, Rwanda, Uganda, Ukraine
16- Cameroon, Ecuador, Jamaica
17- Greece
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Saturday, August 6, 2011
Friday, February 18, 2011
If You Can Fix Her, You Can Have Her
This is essentially what Detroit mayor Dave Bing is telling anyone willing to take one of 200 abandoned homes. A college student can get $2,500 in rent money and a $20,000 forgivable loan; a policeman willing to relocate can get, for $1,000 down, $150,000 in renovation money. The latter offer is an effort to get police officers to actually live in the areas being policed; a glut of abandoned homes and a lack of resident officers leaves some parts of Detroit woefully underpatrolled.
Two words of note, though. First, this more recent story by Business Insider rather prominently quotes 100 homes instead, which is incorrect, and the 100 homes they show don't appear to actually be 100 homes; most of the pictures are via Kevin Bauman's 100 Abandoned Houses. Look at #10, #19, #22 and #23. Nor are they all in the neighborhoods actually being offered, which are Boston Edison and East English Village. Also, this is first-phase thing, involving just the 200 homes, and if it works out well enough, more houses might be opened up. If the Business Insider story is the one you saw- and that's the one Fark greenlit, so it just might be- you got some bad information.
Second, you get what you pay for. Many of the abandoned homes in Detroit, offered or not, are slowly being taken back by Mother Nature, and she is quite far along the process in some cases, as #3 and #64 would indicate. If you decide to hop in, you are going to want to bring plenty of tools.
Two words of note, though. First, this more recent story by Business Insider rather prominently quotes 100 homes instead, which is incorrect, and the 100 homes they show don't appear to actually be 100 homes; most of the pictures are via Kevin Bauman's 100 Abandoned Houses. Look at #10, #19, #22 and #23. Nor are they all in the neighborhoods actually being offered, which are Boston Edison and East English Village. Also, this is first-phase thing, involving just the 200 homes, and if it works out well enough, more houses might be opened up. If the Business Insider story is the one you saw- and that's the one Fark greenlit, so it just might be- you got some bad information.
Second, you get what you pay for. Many of the abandoned homes in Detroit, offered or not, are slowly being taken back by Mother Nature, and she is quite far along the process in some cases, as #3 and #64 would indicate. If you decide to hop in, you are going to want to bring plenty of tools.
Friday, January 21, 2011
The Other Other Hollywood
If you're reasonably up on your trivia, you might know that there's a Hollywood in Florida. If you know that much, you have almost certainly, at some point, used it as part of some lame joke in which Hollywood, Florida is mistaken for Hollywood, California.
You've probably also mistaken it for some trailer-park backwater, probably somewhere in the panhandle. In fact, it is the twelfth-largest city in the state, housing over 140,000 people, and is quite firmly part of the same South Florida metropolitan area that includes Miami. A first-time visitor to Miami could get sufficiently lost to stumble into Hollywood without even realizing it.
Were you to get even more lost, and travel north out of the metro completely, fairly soon you might find yourself in Hobe Sound. At only 11,000 people, and with a much less-developed oceanside, Hobe Sound might come a lot closer to your initial vision of Hollywood, Florida, though it's still not a trailer-park town.
What you would never guess is that Hobe Sound put a lot more effort into becoming the next Hollywood, California than Hollywood, Florida ever did.
Thomas Edison, as you had better be well-aware, was a very proficient inventor. One of those inventions was the motion picture. He was the first to get it to work, patenting the 'kinetoscope' in 1888, even though the groundwork had been laid as early as Leland Stanford. However, he was not the only one with a patent relating to motion pictures, and since this was a new, major thing, not a small bit of chaos resulted. Imagine if Microsoft had a patent on video game consoles, Nintendo had a patent on video games themselves, and Sony had a patent on the CD's the games were printed on. It's not a perfect analogy, but it'll hold up long enough for us to proceed. The rivalries were largely sorted out in 1908, when many of the competing companies banded together to form the Thomas Edison Motion Picture Patents Company with an eye towards creating a monopoly, and made everyone in the budding film industry pay them licensing fees in order to remain in business.
Some paid, and play no further part in this story. Some didn't. Those that didn't, the "independents," chose to run far, far away from the prying eyes of Edison, or any other authority that might make them pay up.
But where to go? It had to be far from Menlo Park, obviously. Another factor that went into the decision was local climate. Since they are picking out a preferred location, it might as well be friendly to filmmaking. Someplace warm. Someplace with nice weather. Someplace with a variety of settings they could use.
Someplace like Hollywood, California. Here, the independents could work with plenty of lead time on the authorities and develop their craft-- producing, distributing and exhibiting. When Edison threatened the supply of film used by an exhibitor, the exhibitor would just start making their own films and proceed merrily along. Eventually, the courts struck down the Motion Picture Patents Company in 1915 as part of the trust-busting movement, but by then they were more or less rendered moot anyway.
What does any of this have to do with Hobe Sound? In the 1920's, Florida, then a very rural state, experienced a land boom. As part of this land boom, Hobe Sound, like the rest of the state, got some fairly grand ideas in their head. They wanted to become the next Hollywood. Led by the Olympia Improvement Corporation, streets were renamed after the Greek pantheon. The town was renamed "Picture City." Fancy lightposts were built. Building construction was started all over town.
Unfortunately, the filmmakers would never get a chance to arrive. While construction was still underway, the land boom collapsed in 1926. Two years later, the Okeechobee hurricane, currently the 9th-deadliest Atlantic hurricane of all time, slammed into Florida. There was no way they were going to be the next Hollywood now. Picture City was changed back to Hobe Sound.
Not that fate was done with them yet. A year after that, as if to rub salt in the wound, the Great Depression hit.
No studio ever got built. The street names remained, the lightposts remained, but that was about it. To this day, the town has remained virtually untouched by the filmmakers they were trying to attract, with the only released feature film ever shot there being the 1972 movie Charcoal Black. Hobe Sound went back to being the sleepy oceanside town it was before and remains today.
Meanwhile, Hollywood, Florida, primarily by virtue of being a Miami suburb, has attracted a number of filmmakers, among them Martin Scorsese, who used the town as part of the backdrop for his 1991 remake of Cape Fear, starring Robert De Niro, Nick Nolte and Jessica Lange. So was The Hours, a 2002 Best Picture nominee. Among the other productions that have used Hollywood, Florida: Midnight Cowboy, 2 Fast 2 Furious, Striptease, and episodes of Burn Notice and Dexter.
Some cities have all the luck.
You've probably also mistaken it for some trailer-park backwater, probably somewhere in the panhandle. In fact, it is the twelfth-largest city in the state, housing over 140,000 people, and is quite firmly part of the same South Florida metropolitan area that includes Miami. A first-time visitor to Miami could get sufficiently lost to stumble into Hollywood without even realizing it.
Were you to get even more lost, and travel north out of the metro completely, fairly soon you might find yourself in Hobe Sound. At only 11,000 people, and with a much less-developed oceanside, Hobe Sound might come a lot closer to your initial vision of Hollywood, Florida, though it's still not a trailer-park town.
What you would never guess is that Hobe Sound put a lot more effort into becoming the next Hollywood, California than Hollywood, Florida ever did.
Thomas Edison, as you had better be well-aware, was a very proficient inventor. One of those inventions was the motion picture. He was the first to get it to work, patenting the 'kinetoscope' in 1888, even though the groundwork had been laid as early as Leland Stanford. However, he was not the only one with a patent relating to motion pictures, and since this was a new, major thing, not a small bit of chaos resulted. Imagine if Microsoft had a patent on video game consoles, Nintendo had a patent on video games themselves, and Sony had a patent on the CD's the games were printed on. It's not a perfect analogy, but it'll hold up long enough for us to proceed. The rivalries were largely sorted out in 1908, when many of the competing companies banded together to form the Thomas Edison Motion Picture Patents Company with an eye towards creating a monopoly, and made everyone in the budding film industry pay them licensing fees in order to remain in business.
Some paid, and play no further part in this story. Some didn't. Those that didn't, the "independents," chose to run far, far away from the prying eyes of Edison, or any other authority that might make them pay up.
But where to go? It had to be far from Menlo Park, obviously. Another factor that went into the decision was local climate. Since they are picking out a preferred location, it might as well be friendly to filmmaking. Someplace warm. Someplace with nice weather. Someplace with a variety of settings they could use.
Someplace like Hollywood, California. Here, the independents could work with plenty of lead time on the authorities and develop their craft-- producing, distributing and exhibiting. When Edison threatened the supply of film used by an exhibitor, the exhibitor would just start making their own films and proceed merrily along. Eventually, the courts struck down the Motion Picture Patents Company in 1915 as part of the trust-busting movement, but by then they were more or less rendered moot anyway.
What does any of this have to do with Hobe Sound? In the 1920's, Florida, then a very rural state, experienced a land boom. As part of this land boom, Hobe Sound, like the rest of the state, got some fairly grand ideas in their head. They wanted to become the next Hollywood. Led by the Olympia Improvement Corporation, streets were renamed after the Greek pantheon. The town was renamed "Picture City." Fancy lightposts were built. Building construction was started all over town.
Unfortunately, the filmmakers would never get a chance to arrive. While construction was still underway, the land boom collapsed in 1926. Two years later, the Okeechobee hurricane, currently the 9th-deadliest Atlantic hurricane of all time, slammed into Florida. There was no way they were going to be the next Hollywood now. Picture City was changed back to Hobe Sound.
Not that fate was done with them yet. A year after that, as if to rub salt in the wound, the Great Depression hit.
No studio ever got built. The street names remained, the lightposts remained, but that was about it. To this day, the town has remained virtually untouched by the filmmakers they were trying to attract, with the only released feature film ever shot there being the 1972 movie Charcoal Black. Hobe Sound went back to being the sleepy oceanside town it was before and remains today.
Meanwhile, Hollywood, Florida, primarily by virtue of being a Miami suburb, has attracted a number of filmmakers, among them Martin Scorsese, who used the town as part of the backdrop for his 1991 remake of Cape Fear, starring Robert De Niro, Nick Nolte and Jessica Lange. So was The Hours, a 2002 Best Picture nominee. Among the other productions that have used Hollywood, Florida: Midnight Cowboy, 2 Fast 2 Furious, Striptease, and episodes of Burn Notice and Dexter.
Some cities have all the luck.
Monday, January 3, 2011
Random News Generator- Belize
First RNG of the new year. We are taken to Belize today, where they, after having made TIEA's (Tax Information Sharing Agreements) with Australia, Belgium, Denmark, the Faroe Islands, Finland, France, Greenland, Iceland, Norway, Portugal, Sweden and the United Kingdom, they have been removed from the blacklists of the OCED and G20.
This is important to Belize because they offer themselves as a tax haven, and being on the blacklist would ruin that economic approach by preventing investors from the first world from putting their money into the country. Coming off the blacklist comes at a price, however; with the TIEA's in place, investors cannot remain anonymous, which for some is part of the appeal of doing business in Belize in the first place.
Which, to bring us full circle, is why the OCED and G20 want Belize to have the TIEA's: to limit the options for those kind of investors as much as possible. Anonymous investors in tax havens normally aren't doing nice things.
Here's the problem, though: TIEA's aren't what you would call 'effective'. The Guardian's Richard Murphy goes into more detail, but suffice to say that you can't ask for anything from prior to when the agreement was made, and come to think of it, you have to ask for information, and asking has more hurdles attached to it than a Freedom of Information Act request about Jimmy Hoffa. As Murphy puts it, "To ask a successful question under the terms of a TIEA means you already have to know the answer." The result: barely anybody asks anybody about anything.
All hat, but very little cattle, so to speak.
This is important to Belize because they offer themselves as a tax haven, and being on the blacklist would ruin that economic approach by preventing investors from the first world from putting their money into the country. Coming off the blacklist comes at a price, however; with the TIEA's in place, investors cannot remain anonymous, which for some is part of the appeal of doing business in Belize in the first place.
Which, to bring us full circle, is why the OCED and G20 want Belize to have the TIEA's: to limit the options for those kind of investors as much as possible. Anonymous investors in tax havens normally aren't doing nice things.
Here's the problem, though: TIEA's aren't what you would call 'effective'. The Guardian's Richard Murphy goes into more detail, but suffice to say that you can't ask for anything from prior to when the agreement was made, and come to think of it, you have to ask for information, and asking has more hurdles attached to it than a Freedom of Information Act request about Jimmy Hoffa. As Murphy puts it, "To ask a successful question under the terms of a TIEA means you already have to know the answer." The result: barely anybody asks anybody about anything.
All hat, but very little cattle, so to speak.
Saturday, July 24, 2010
Arizona's Amazing Transformation
UPON SB 1070'S PASSAGE: A state illegal immigrants don't want to be.
AS SB 1070 NEARS THE TIME OF ENFORCEMENT: A state no Hispanics period want to be. Illegal, legal, lifelong citizens, doesn't matter.
Considering that Arizona is famous for its significant Hispanic population, this has pretty much killed Arizona's economic recovery dead, or at least Phoenix's. The local economy has crashed so hard it's amazing.
AS SB 1070 NEARS THE TIME OF ENFORCEMENT: A state no Hispanics period want to be. Illegal, legal, lifelong citizens, doesn't matter.
Considering that Arizona is famous for its significant Hispanic population, this has pretty much killed Arizona's economic recovery dead, or at least Phoenix's. The local economy has crashed so hard it's amazing.
Monday, July 19, 2010
Golden Iranian Nugget
Twitter? No problem. The Ahmadinejad government- I hesitate to say 'regime' out of a probably-misplaced sense of impartiality- can shut that down without all that much trouble.
Green Revolution? No problem. They had some significant difficulties handling that, but the Ahmadinejad government has beaten them down considerably over time.
Non-governmental, purely economic-related protests and strikes in the Tehran bazaar? (And all for around ten bucks?) PROBLEEEEEEEEEEEEM!
Green Revolution? No problem. They had some significant difficulties handling that, but the Ahmadinejad government has beaten them down considerably over time.
Non-governmental, purely economic-related protests and strikes in the Tehran bazaar? (And all for around ten bucks?) PROBLEEEEEEEEEEEEM!
Monday, June 28, 2010
TAXES BAD-- Well, Hang On A Sec; Let's Figure This Out
This one's always bugged me a bit, and it's high time to put this to bed once and for all. If you've spent long enough in Internet political flamewars, inevitably you will eventually get into a row about taxes. Invariably, it will be driven by someone seeking lower taxes, for a variety of reasons personal and societal.
For a long time, they didn't have any real competition. After all, who wants to pay more taxes? In recent years, though, there has been an increase, however small, in people defending higher taxes, on the basis that without a certain amount of taxes, a country can't properly function. Invariably, this side will bring up Somalia as the low-taxes proxy and somewhere in Scandinavia, most likely Sweden, as the high-taxes proxy. And obviously you'd rather be living in Sweden than Somalia, right?
It's just that teeny, tiny sample size, though. And that's what's been bugging me. Without any further information, for all one knows Somalia and Sweden are strawmen.
So while I personally fall on the pro-taxes side of things- make of that what you will- it'd be nice to get some confirmation, disconfirmation, or even inconclusiveness.
So here's what we'll do. We'll tease out the sample size more. We'll take a larger set of global high and low tax rates; we'll use a top 20 on each side. That should be plenty enough. We will then compare the countries shown on a standard-of-living comparison, averaging the scores to provide a mean standard-of-living rating for the high-tax group and for the low-tax group.
Then, it's a simple matter of seeing who did better. Sound good? Good.
The first thing we must do, of course, is identify a pair of suitable data sets to use; we need something that compares a wide variety of countries based on the same set of data.
For tax rate, we will use the Heritage Foundation's 2010 Index of Economic Freedom, showing, among other things, tax revenue as a percentage of GDP. (They also have government spending as a percentage of GDP, but we'll shelve that for perhaps another day.) Somalia was not examined in this dataset, which is a mixed blessing. On one hand, it's bad, as we can't truly get the Somalia/Sweden faceoff this premise demands. On the other hand, even if Somalia assessed taxes, how would they expect to collect?
The Heritage Foundation would not, by the way, be my first choice of source, but the less-taxes crowd is more likely to be Republican and Libertarian, and they would be more willing to use the Heritage Foundation straightaway. So as far as representing a viewpoint, it's not as bad an option as you might think. (Besides, they have the widest variety of countries by several orders of magnitude; everyone else I saw only compared developed nations.)
For standard-of-living, we will use the United Nations 2009 Human Development Index (which was produced with 2007 numbers). They weren't able to get Somalia either, by the way.
We will set the rule that in order to be placed on the high-tax or low-tax list, you must first qualify by being listed on the 2009 Human Development Index list. That's because it would screw things up to try and figure out how or if to score a 'n/a' or if to use data from previous years or anything of the sort. I'll just disqualify the country. This is less about who specifically is on each list and more about how the ones that are on each list compare to each other.
Got all that? Great. Time to select our groups. With the disqualified countries noted, and there were two of them:
LOW-TAX GROUP
DISQUALIFIED: Iraq- "negligible", surely under that of the UAE but really it's academic
1. United Arab Emirates- tax revenue as a percentage of GDP is 1.0%
2. Equatorial Guinea- 1.7%
3. Qatar- 2.6%
4. Bahrain- 2.7%
5. Libya- 2.9%
6. Myanmar- 3.0%
7. Kuwait- 3.1%
8. Oman- 3.3%
9. Chad- 4.2%
10. Afghanistan- 5.2%
11. Congo-Brazzaville- 5.4%
12. Nigeria- 5.6%
13. Saudi Arabia- 5.6%
14. Iran- 6.1%
15. Angola- 6.2%
16. Haiti- 6.9%
17. Sudan- 7.0%
18. Central African Republic- 7.3%
19. Yemen- 7.3%
20. Algeria- 7.9%
HIGH-TAX GROUP
1. United Kingdom- 37.9%
2. Netherlands- 38.0%
3. Slovenia- 38.4%
4. Bosnia/Herzegovina- 38.5%
5. Hungary- 39.9%
6. Germany- 40.8%
7. Swaziland- 41.2%
8. Iceland- 41.4%
9. Cyprus- 41.6%
10. Austria- 41.9%
11. Finland- 43.1%
12. Italy- 43.3%
13. Norway- 43.4%
14. Cuba- 44.8%
15. France- 45.0%
16. Belgium- 46.1%
17. Sweden- 48.9%
18. Denmark- 49.5%
19. Lesotho- 54.3%
DISQUALIFIED- Kiribati- 69.7%
20. Timor-Leste- 133.9% (Because you are assuredly wondering where THAT number came from, the Heritage Foundation shows it "reflecting large tax revenues from petroleum projects in the Timor Sea.")
So we've got our field and we've got our teams. Now we carry that to the 2009 Human Development Index, and look at the scores our 40 countries got, along with their rankings (out of 182).
LOW-TAX GROUP
1. United Arab Emirates- HDI score is .903 (ranked 35th)
2. Equatorial Guinea- .719 (118th)
3. Qatar- .910 (33rd)
4. Bahrain- .895 (39th)
5. Libya- .847 (55th)
6. Myanmar- .586 (138th)
7. Kuwait- .916 (31st)
8. Oman- .846 (56th)
9. Chad- .392 (175th)
10. Afghanistan- .352 (181st)
11. Congo-Brazzaville- .601 (136th)
12. Nigeria- .511 (158th)
13. Saudi Arabia- .843 (59th)
14. Iran- .782 (88th)
15. Angola- .564 (143rd)
16. Haiti- .532 (149th)
17. Sudan- .531 (150th)
18. Central African Republic- .369 (179th)
19. Yemen- .575 (140th)
20. Algeria- .754 (104th)
HIGH-TAX GROUP
1. United Kingdom- .947 (21st)
2. Netherlands- .964 (6th)
3. Slovenia- .929 (29th)
4. Bosnia/Herzegovina- .812 (76th)
5. Hungary- .879 (43rd)
6. Germany- .947 (22nd)
7. Swaziland- .572 (142nd)
8. Iceland- .969 (3rd)
9. Cyprus- .914 (32nd)
10. Austria- .955 (14th)
11. Finland- .959 (12th)
12. Italy- .951 (18th)
13. Norway- .971 (1st)
14. Cuba- .863 (51st)
15. France- .961 (8th)
16. Belgium- .953 (17th)
17. Sweden- .963 (7th)
18. Denmark- .955 (16th)
19. Lesotho- .514 (156th)
20. Timor-Leste- .489 (162nd)
And now for the average scores.
The low-tax group, with an average of 4.75% tax revenue as a percentage of GDP, has a mean HDI score of .6714 (if placed in the HDI, they would collectively be somewhere between South Africa and Morocco), and a mean ranking of 108.35.
The high-tax group, with an average of 51.08% tax revenue as a percentage of GDP (albeit skewed high a bit by Timor-Leste), has a mean HDI score of .87335 (which if placed in the HDI table would get them between Chile and Croatia), and a mean ranking of 41.8.
The numbers pretty much speak for themselves, decisively in favor of the high-tax group.
For a long time, they didn't have any real competition. After all, who wants to pay more taxes? In recent years, though, there has been an increase, however small, in people defending higher taxes, on the basis that without a certain amount of taxes, a country can't properly function. Invariably, this side will bring up Somalia as the low-taxes proxy and somewhere in Scandinavia, most likely Sweden, as the high-taxes proxy. And obviously you'd rather be living in Sweden than Somalia, right?
It's just that teeny, tiny sample size, though. And that's what's been bugging me. Without any further information, for all one knows Somalia and Sweden are strawmen.
So while I personally fall on the pro-taxes side of things- make of that what you will- it'd be nice to get some confirmation, disconfirmation, or even inconclusiveness.
So here's what we'll do. We'll tease out the sample size more. We'll take a larger set of global high and low tax rates; we'll use a top 20 on each side. That should be plenty enough. We will then compare the countries shown on a standard-of-living comparison, averaging the scores to provide a mean standard-of-living rating for the high-tax group and for the low-tax group.
Then, it's a simple matter of seeing who did better. Sound good? Good.
The first thing we must do, of course, is identify a pair of suitable data sets to use; we need something that compares a wide variety of countries based on the same set of data.
For tax rate, we will use the Heritage Foundation's 2010 Index of Economic Freedom, showing, among other things, tax revenue as a percentage of GDP. (They also have government spending as a percentage of GDP, but we'll shelve that for perhaps another day.) Somalia was not examined in this dataset, which is a mixed blessing. On one hand, it's bad, as we can't truly get the Somalia/Sweden faceoff this premise demands. On the other hand, even if Somalia assessed taxes, how would they expect to collect?
The Heritage Foundation would not, by the way, be my first choice of source, but the less-taxes crowd is more likely to be Republican and Libertarian, and they would be more willing to use the Heritage Foundation straightaway. So as far as representing a viewpoint, it's not as bad an option as you might think. (Besides, they have the widest variety of countries by several orders of magnitude; everyone else I saw only compared developed nations.)
For standard-of-living, we will use the United Nations 2009 Human Development Index (which was produced with 2007 numbers). They weren't able to get Somalia either, by the way.
We will set the rule that in order to be placed on the high-tax or low-tax list, you must first qualify by being listed on the 2009 Human Development Index list. That's because it would screw things up to try and figure out how or if to score a 'n/a' or if to use data from previous years or anything of the sort. I'll just disqualify the country. This is less about who specifically is on each list and more about how the ones that are on each list compare to each other.
Got all that? Great. Time to select our groups. With the disqualified countries noted, and there were two of them:
LOW-TAX GROUP
DISQUALIFIED: Iraq- "negligible", surely under that of the UAE but really it's academic
1. United Arab Emirates- tax revenue as a percentage of GDP is 1.0%
2. Equatorial Guinea- 1.7%
3. Qatar- 2.6%
4. Bahrain- 2.7%
5. Libya- 2.9%
6. Myanmar- 3.0%
7. Kuwait- 3.1%
8. Oman- 3.3%
9. Chad- 4.2%
10. Afghanistan- 5.2%
11. Congo-Brazzaville- 5.4%
12. Nigeria- 5.6%
13. Saudi Arabia- 5.6%
14. Iran- 6.1%
15. Angola- 6.2%
16. Haiti- 6.9%
17. Sudan- 7.0%
18. Central African Republic- 7.3%
19. Yemen- 7.3%
20. Algeria- 7.9%
HIGH-TAX GROUP
1. United Kingdom- 37.9%
2. Netherlands- 38.0%
3. Slovenia- 38.4%
4. Bosnia/Herzegovina- 38.5%
5. Hungary- 39.9%
6. Germany- 40.8%
7. Swaziland- 41.2%
8. Iceland- 41.4%
9. Cyprus- 41.6%
10. Austria- 41.9%
11. Finland- 43.1%
12. Italy- 43.3%
13. Norway- 43.4%
14. Cuba- 44.8%
15. France- 45.0%
16. Belgium- 46.1%
17. Sweden- 48.9%
18. Denmark- 49.5%
19. Lesotho- 54.3%
DISQUALIFIED- Kiribati- 69.7%
20. Timor-Leste- 133.9% (Because you are assuredly wondering where THAT number came from, the Heritage Foundation shows it "reflecting large tax revenues from petroleum projects in the Timor Sea.")
So we've got our field and we've got our teams. Now we carry that to the 2009 Human Development Index, and look at the scores our 40 countries got, along with their rankings (out of 182).
LOW-TAX GROUP
1. United Arab Emirates- HDI score is .903 (ranked 35th)
2. Equatorial Guinea- .719 (118th)
3. Qatar- .910 (33rd)
4. Bahrain- .895 (39th)
5. Libya- .847 (55th)
6. Myanmar- .586 (138th)
7. Kuwait- .916 (31st)
8. Oman- .846 (56th)
9. Chad- .392 (175th)
10. Afghanistan- .352 (181st)
11. Congo-Brazzaville- .601 (136th)
12. Nigeria- .511 (158th)
13. Saudi Arabia- .843 (59th)
14. Iran- .782 (88th)
15. Angola- .564 (143rd)
16. Haiti- .532 (149th)
17. Sudan- .531 (150th)
18. Central African Republic- .369 (179th)
19. Yemen- .575 (140th)
20. Algeria- .754 (104th)
HIGH-TAX GROUP
1. United Kingdom- .947 (21st)
2. Netherlands- .964 (6th)
3. Slovenia- .929 (29th)
4. Bosnia/Herzegovina- .812 (76th)
5. Hungary- .879 (43rd)
6. Germany- .947 (22nd)
7. Swaziland- .572 (142nd)
8. Iceland- .969 (3rd)
9. Cyprus- .914 (32nd)
10. Austria- .955 (14th)
11. Finland- .959 (12th)
12. Italy- .951 (18th)
13. Norway- .971 (1st)
14. Cuba- .863 (51st)
15. France- .961 (8th)
16. Belgium- .953 (17th)
17. Sweden- .963 (7th)
18. Denmark- .955 (16th)
19. Lesotho- .514 (156th)
20. Timor-Leste- .489 (162nd)
And now for the average scores.
The low-tax group, with an average of 4.75% tax revenue as a percentage of GDP, has a mean HDI score of .6714 (if placed in the HDI, they would collectively be somewhere between South Africa and Morocco), and a mean ranking of 108.35.
The high-tax group, with an average of 51.08% tax revenue as a percentage of GDP (albeit skewed high a bit by Timor-Leste), has a mean HDI score of .87335 (which if placed in the HDI table would get them between Chile and Croatia), and a mean ranking of 41.8.
The numbers pretty much speak for themselves, decisively in favor of the high-tax group.
Wednesday, May 12, 2010
Bernie Madoff Was An Amateur
Let's stay on the topic of stupidity today. It's such a rich vein to tap, stupidity. There's just so much of it to marvel at.
When's the last time you thought about Albania? Such an architectural marvel, that nation. But if you think America has been taken in by Enron and Goldman Sachs and the like, you haven't seen anything yet.
Tirana is not New York. Albania knows a lot less about how to play the financial markets than Wall Street. They weren't helped by being a Communist regime under Enver Hoxha until 1991. So when the Iron Curtain came down, one of the things Albania had to do was get itself a financial system.
Their first attempt was good old fashioned banks. Three state-run banks had 90% of the money. They also had some bad loans. Not being total lunkheads like we were, Albania's government started to regulate credit ceilings.
Unfortunately, the Albanian people WERE total lunkheads, and responded by pulling their money out of the banks. But where would the money go? There weren't enough private banks to serve the purpose.
Ponzi schemes. Gigantic Ponzi schemes.
As you might be aware from the Bernie Madoff scandal, a Ponzi scheme needs a steady influx of new investors in order to keep going. The continual addition of money by new investors helps to keep the old investors involved. The earliest ones even get paid some of that money.
Albania managed to break a Ponzi scheme. Not because they busted it. No, no. The government was fooled too, even calling the so-called private deposit-taking institutions good for the economy. In fact, when a bill was passed in February 1996 giving the Bank of Albania the power to close just such things, the Bank couldn't get the government on board. The scheme runners bought enough of them to make sure they were.
So the government didn't break the Ponzi scheme. Albania broke the Ponzi scheme because two-thirds of the country got in on the ground floor. In this paragraph from the IMF's story on it, you can see some of the competing schemes (oh yes, they were competing with each other) showing one of the warning signs- raising interest rates- as well as the fervor of the investing:
When the IMF stepped in to try and put a stop to it, they were smacked around by both bought politicians and lunkhead voters. Eventually, though, the situation became too dangerous for even the politicians, and they set up a committee to try and deal with the schemes.
It was too late. The first scheme, Sude, collapsed before the committee could even meet. (Who was Sude run by? A 32-year-old gypsy fortuneteller. With a crystal ball and everything. She was ultimately entrusted with $100 million.) The government finally acted, but only after other schemes, confidence shaken by Sude's failure, were collapsing left and right and there was no more money for the government to make from them. A law banning pyramid schemes was passed, but there was no definition of what a pyramid scheme actually was. Even some of the actual pyramid schemes were waved off as "bilateral loans".
It was too late for the government to even save itself; a full-scale uprising was underway by March 1997 that would soon see a new interim government seated that would actually do something. Some 2,000 people would die, the south was in anarchy, people would flee the country, those weapons taken out of the armory that weren't used in the uprising would end up largely migrating to Kosovo. The soldiers and cops weren't about to stop it; they'd already deserted and in fact had done some of the weapon looting.
And through it all, four of the ten major schemes were still alive. They obviously weren't getting any new money, but they stayed in the game by slowly- very, very slowly- paying back investors, just barely enough to get people convinced that everybody would eventually, on some distant day, get their money back. Regulators wouldn't gain control of the last of them until March 1998.
All could have been avoided had the Albanian people just gone along with the regulation of credit ceilings.
When's the last time you thought about Albania? Such an architectural marvel, that nation. But if you think America has been taken in by Enron and Goldman Sachs and the like, you haven't seen anything yet.
Tirana is not New York. Albania knows a lot less about how to play the financial markets than Wall Street. They weren't helped by being a Communist regime under Enver Hoxha until 1991. So when the Iron Curtain came down, one of the things Albania had to do was get itself a financial system.
Their first attempt was good old fashioned banks. Three state-run banks had 90% of the money. They also had some bad loans. Not being total lunkheads like we were, Albania's government started to regulate credit ceilings.
Unfortunately, the Albanian people WERE total lunkheads, and responded by pulling their money out of the banks. But where would the money go? There weren't enough private banks to serve the purpose.
Ponzi schemes. Gigantic Ponzi schemes.
As you might be aware from the Bernie Madoff scandal, a Ponzi scheme needs a steady influx of new investors in order to keep going. The continual addition of money by new investors helps to keep the old investors involved. The earliest ones even get paid some of that money.
Albania managed to break a Ponzi scheme. Not because they busted it. No, no. The government was fooled too, even calling the so-called private deposit-taking institutions good for the economy. In fact, when a bill was passed in February 1996 giving the Bank of Albania the power to close just such things, the Bank couldn't get the government on board. The scheme runners bought enough of them to make sure they were.
So the government didn't break the Ponzi scheme. Albania broke the Ponzi scheme because two-thirds of the country got in on the ground floor. In this paragraph from the IMF's story on it, you can see some of the competing schemes (oh yes, they were competing with each other) showing one of the warning signs- raising interest rates- as well as the fervor of the investing:
The proliferation of schemes had baleful effects. First, more depositors were drawn in. Although VEFA had the largest liabilities, it had only 85,000 depositors. Xhafferi and Populli between them attracted nearly 2 million depositors—in a country with a population of 3.5 million—within a few months. Second, the investment funds felt pressured to compete and began to offer higher interest rates on deposits. In July, Kamberi raised its monthly interest rate to 10 percent. In September, Populli began offering more than 30 percent a month. In November, Xhafferi offered to treble depositors' money in three months; Sude responded with an offer to double principal in two months. By November, the face value of the schemes' liabilities totaled $1.2 billion. Albanians sold their houses to invest in the schemes; farmers sold their livestock. The mood is vividly captured by a resident who said that, in the fall of 1996, Tirana smelled and sounded like a slaughterhouse, as farmers drove their animals to market to invest the proceeds in the pyramid schemes.
When the IMF stepped in to try and put a stop to it, they were smacked around by both bought politicians and lunkhead voters. Eventually, though, the situation became too dangerous for even the politicians, and they set up a committee to try and deal with the schemes.
It was too late. The first scheme, Sude, collapsed before the committee could even meet. (Who was Sude run by? A 32-year-old gypsy fortuneteller. With a crystal ball and everything. She was ultimately entrusted with $100 million.) The government finally acted, but only after other schemes, confidence shaken by Sude's failure, were collapsing left and right and there was no more money for the government to make from them. A law banning pyramid schemes was passed, but there was no definition of what a pyramid scheme actually was. Even some of the actual pyramid schemes were waved off as "bilateral loans".
It was too late for the government to even save itself; a full-scale uprising was underway by March 1997 that would soon see a new interim government seated that would actually do something. Some 2,000 people would die, the south was in anarchy, people would flee the country, those weapons taken out of the armory that weren't used in the uprising would end up largely migrating to Kosovo. The soldiers and cops weren't about to stop it; they'd already deserted and in fact had done some of the weapon looting.
And through it all, four of the ten major schemes were still alive. They obviously weren't getting any new money, but they stayed in the game by slowly- very, very slowly- paying back investors, just barely enough to get people convinced that everybody would eventually, on some distant day, get their money back. Regulators wouldn't gain control of the last of them until March 1998.
All could have been avoided had the Albanian people just gone along with the regulation of credit ceilings.
Saturday, May 8, 2010
Move Your Money
You are probably angry at big banks. You are also probably angry about Congress not doing enough to your liking to rein in big banks.
Question: where do you bank?
Big banks are only big banks because, well, because a lot of people bank with them. If fewer people bank with those big banks, those banks that treat your retirement fund like Monopoly money, sooner or later, those big banks won't be so big anymore.
This is the principle behind the Move Your Money movement. It encourages those who have their money in a big bank to get that money out of the big bank, and place that money in a smaller, more responsible community bank. Don't know which ones are responsible? They've already figured it out for you.
Hop to it.
Question: where do you bank?
Big banks are only big banks because, well, because a lot of people bank with them. If fewer people bank with those big banks, those banks that treat your retirement fund like Monopoly money, sooner or later, those big banks won't be so big anymore.
This is the principle behind the Move Your Money movement. It encourages those who have their money in a big bank to get that money out of the big bank, and place that money in a smaller, more responsible community bank. Don't know which ones are responsible? They've already figured it out for you.
Hop to it.
Friday, February 5, 2010
9.7%: Just A Number
Continuing our little crusade against bad math, today brings news that the unemployment rate has dipped below 10%, to 9.7%, but it comes with a loss of 20,000 jobs.
Unless a bomb went off and nobody said anything, these numbers don't reconcile with each other. There aren't any fewer people than there were last month, so if the number of jobs went down, logically the unemployment rate should go up, right?
The unemployment rate doesn't work that way. What's more, a fair amount of people know it doesn't work that way- it doesn't take into account the discouraged or underemployed (full-timers forced into being part-timers)- and yet we still use the figure we do, more or less just to save face. We essentially lie to ourselves and tell ourselves that things are better than they actually are. Nobody wants to be the guy that makes the unemployment numbers say what they should be saying, because what would happen then is there would be a gigantic, shocking leap in the unemployment rate, and whoever corrected the data would be punished, probably thrown out of office, essentially for the crime of fixing bad data.
For more on this, head over to the Atlantic; they go into a lot more detail with this month's numbers than I can, plus they have pretty graphs. The key thing to note, though, is that they went and fixed the numbers themselves, and came up with a seasonally-adjusted rate of 11.2% if you add in discouraged workers (which I would), and 16.5% if you also add in the underemployed (which I probably wouldn't, but you might).
Unless a bomb went off and nobody said anything, these numbers don't reconcile with each other. There aren't any fewer people than there were last month, so if the number of jobs went down, logically the unemployment rate should go up, right?
The unemployment rate doesn't work that way. What's more, a fair amount of people know it doesn't work that way- it doesn't take into account the discouraged or underemployed (full-timers forced into being part-timers)- and yet we still use the figure we do, more or less just to save face. We essentially lie to ourselves and tell ourselves that things are better than they actually are. Nobody wants to be the guy that makes the unemployment numbers say what they should be saying, because what would happen then is there would be a gigantic, shocking leap in the unemployment rate, and whoever corrected the data would be punished, probably thrown out of office, essentially for the crime of fixing bad data.
For more on this, head over to the Atlantic; they go into a lot more detail with this month's numbers than I can, plus they have pretty graphs. The key thing to note, though, is that they went and fixed the numbers themselves, and came up with a seasonally-adjusted rate of 11.2% if you add in discouraged workers (which I would), and 16.5% if you also add in the underemployed (which I probably wouldn't, but you might).
Wednesday, February 3, 2010
Burn The Debt Clock
It's a perpetual and ever-growing sign of government waste. There's a well-known symbol devoted to counting every single dollar devoted to it. It causes outrage from voters and politicians alike every time it grabs the headlines. And there seems to be no end in sight to bringing it down, regardless of who's in charge.
It's the national debt. The number, according to the CIA World Factbook, now stands at $13.45 trillion, an amount so large as to be an abstract number, beyond the range of an average person's comprehension. It's massive, it's growing, and it produces outrage every time the debt ceiling is raised.
But is it the best way to gauge America's financial situation? No.
The national debt merely measures one side of America's financial ledger- its external debt- and doesn't take into the amount America itself is owed- its national credits. Nor does it measure how big a bite it takes out of the country's books.
Now, let's be clear before we go any further: we're measuring external debt here, not public debt, which the National Debt Clock measures. The Debt Clock shows $12.36 trillion currently, but much of the Debt Clock's number, around three-quarters of it, is taken from internal debts, money that we effectively owe to ourselves. If you wish to measure this number, the most effective way to do it is to look at public debt as percentage of gross domestic product, not the raw dollar amount of debt. In this regard, the CIA Factbook shows the United States sitting at 39.70%, in 66th position out of 129 nations measured, almost exactly in the middle. Almost nobody outside the CIA would place the percentage that low for the U.S., but the larger point is that not a single one of the 129 nations is shown as being debt-free. The IMF rates the U.S. much higher, at 65.363%, and other sources will place the U.S. even higher than that, but again, that misses the larger point that no country will be found on the plus side in this measurement.
The ten worst-performing countries in terms of public debt, according to the CIA: Zimbabwe, Japan, St. Kitts and Nevis, Lebanon, Jamaica, Singapore, Italy, Greece, Sudan, Iceland. Ten countries that are all over the place in terms of overall fiscal health. This is a bad way of measuring ourselves too. Forget the Debt Clock.
Very few countries on Earth are debt-free externally either. According to the CIA, only four places can make that claim: Brunei, Liechtenstein, Macau, and Palau, and one of those, Macau, isn't widely recognized as a sovereign nation. The top of the external debt scoreboard is an indiscriminate Who's Who of the First World, less a measure of a nation's fiscal responsibility than one of a nation's ability to do business. After the United States, the rest of the top ten reads: United Kingdom, Germany, France, Netherlands, Spain, Ireland, Japan, Luxembourg, Switzerland. They all have over a trillion dollars US in external debt. Australia has an estimated $920 billion in debt Canada has an estimated $833 billion in debt. Norway is an estimated $548 billion in debt. China is an estimated $347 billion in debt. Saudi Arabia is an estimated $72 billion in debt. Venezuela is estimated at $43 billion in debt. Tiny Niue is in the fifth-best debt situation on Earth, 194st out of 198, and they show an estimated $418,000 in debt. The four that are not in debt merely show as breaking even.
This doesn't work. Everybody has debt, but obviously countries have to come out ahead. Economics don't work if everybody loses. Nobody would engage in trade if that were the case. Even in a Ponzi scheme, there's still one person that comes out ahead in the end. All that money is going somewhere. So how do you find where exactly?
Enter the account balance: credits minus debts. You don't balance your checkbook only by figuring out how much money you pay out. You get paid too. It's measured the same way as the national debt; however, the account balance tallies up the money you are owed by countries in debt to you, as well as the money you owe. (An even better gauge of where we stand would be account balance as a percentage of GDP, where the US's -4.330% pales in comparison to many other nations, such as Bulgaria's -21.853%, Nicaragua's -24.840%, or Liberia's -42.141%, but since hard dollar figures are what is needed, it's not as useful.)
Unfortunately, the United States doesn't do well in account balance either. In fact, America looks even worse. We at least have some company in national debt, with the United Kingdom carrying over $9 trillion in debt of its own, but as far as account balance goes, we're in a class by ourselves. According to the IMF's World Economic Outlook for April 2009, the United States is $673.266 billion in the red, worlds behind second-to-last Spain, who is merely $154.036 billion US in the red.
On the other end of the spectrum, unsurprisingly, China comes out ahead of the pack, $440.011 billion US in the black.
The ten countries furthest in the black (in US dollars):
China, 440.011 billion
Germany, 235.257 billion
Japan, 157.079 billion
Saudi Arabia, 139.041 billion
Russia, 102.331 billion
Norway, 83.802 billion
Kuwait, 70.594 billion
Switzerland, 44.847 billion
Sweden, 40.429 billion
Libya, 39.217 billion
The ten countries furthest in the red (in US dollars):
United States, -673.266 billion
Spain, -154.036 billion
Italy, -73.200 billion
Greece, -51.482 billion
United Kingdom, -45.392 billion
France, -45.327 billion
Australia, -42.833 billion
Turkey, 41.416 billion
India, -33.330 billion
Portugal, -29.437 billion
However, as bad as that may look, there is a silver lining. The US may be languishing far behind everyone else financially, but the actual amount we are in the red is only a fraction of what the national debt claims. The $673.266 billion in account balance is only 5% of what the national debt of $13.45 trillion shows. That means it's that much easier to pay off.
And furthermore, while the last time we were debt-free was in 1835, we were a creditor nation not very long ago at all. According to the IMF, the US was in the black as recently as 1991, when our account balance showed a surplus of $2.895 billion. So it is possible.
We don't need to become debt-free. Almost nobody is. We just need to have more money coming in than we have going out. And we've done it recently enough that some members of Congress who were in office at the time are still around.
Now can we do it again?
It's the national debt. The number, according to the CIA World Factbook, now stands at $13.45 trillion, an amount so large as to be an abstract number, beyond the range of an average person's comprehension. It's massive, it's growing, and it produces outrage every time the debt ceiling is raised.
But is it the best way to gauge America's financial situation? No.
The national debt merely measures one side of America's financial ledger- its external debt- and doesn't take into the amount America itself is owed- its national credits. Nor does it measure how big a bite it takes out of the country's books.
Now, let's be clear before we go any further: we're measuring external debt here, not public debt, which the National Debt Clock measures. The Debt Clock shows $12.36 trillion currently, but much of the Debt Clock's number, around three-quarters of it, is taken from internal debts, money that we effectively owe to ourselves. If you wish to measure this number, the most effective way to do it is to look at public debt as percentage of gross domestic product, not the raw dollar amount of debt. In this regard, the CIA Factbook shows the United States sitting at 39.70%, in 66th position out of 129 nations measured, almost exactly in the middle. Almost nobody outside the CIA would place the percentage that low for the U.S., but the larger point is that not a single one of the 129 nations is shown as being debt-free. The IMF rates the U.S. much higher, at 65.363%, and other sources will place the U.S. even higher than that, but again, that misses the larger point that no country will be found on the plus side in this measurement.
The ten worst-performing countries in terms of public debt, according to the CIA: Zimbabwe, Japan, St. Kitts and Nevis, Lebanon, Jamaica, Singapore, Italy, Greece, Sudan, Iceland. Ten countries that are all over the place in terms of overall fiscal health. This is a bad way of measuring ourselves too. Forget the Debt Clock.
Very few countries on Earth are debt-free externally either. According to the CIA, only four places can make that claim: Brunei, Liechtenstein, Macau, and Palau, and one of those, Macau, isn't widely recognized as a sovereign nation. The top of the external debt scoreboard is an indiscriminate Who's Who of the First World, less a measure of a nation's fiscal responsibility than one of a nation's ability to do business. After the United States, the rest of the top ten reads: United Kingdom, Germany, France, Netherlands, Spain, Ireland, Japan, Luxembourg, Switzerland. They all have over a trillion dollars US in external debt. Australia has an estimated $920 billion in debt Canada has an estimated $833 billion in debt. Norway is an estimated $548 billion in debt. China is an estimated $347 billion in debt. Saudi Arabia is an estimated $72 billion in debt. Venezuela is estimated at $43 billion in debt. Tiny Niue is in the fifth-best debt situation on Earth, 194st out of 198, and they show an estimated $418,000 in debt. The four that are not in debt merely show as breaking even.
This doesn't work. Everybody has debt, but obviously countries have to come out ahead. Economics don't work if everybody loses. Nobody would engage in trade if that were the case. Even in a Ponzi scheme, there's still one person that comes out ahead in the end. All that money is going somewhere. So how do you find where exactly?
Enter the account balance: credits minus debts. You don't balance your checkbook only by figuring out how much money you pay out. You get paid too. It's measured the same way as the national debt; however, the account balance tallies up the money you are owed by countries in debt to you, as well as the money you owe. (An even better gauge of where we stand would be account balance as a percentage of GDP, where the US's -4.330% pales in comparison to many other nations, such as Bulgaria's -21.853%, Nicaragua's -24.840%, or Liberia's -42.141%, but since hard dollar figures are what is needed, it's not as useful.)
Unfortunately, the United States doesn't do well in account balance either. In fact, America looks even worse. We at least have some company in national debt, with the United Kingdom carrying over $9 trillion in debt of its own, but as far as account balance goes, we're in a class by ourselves. According to the IMF's World Economic Outlook for April 2009, the United States is $673.266 billion in the red, worlds behind second-to-last Spain, who is merely $154.036 billion US in the red.
On the other end of the spectrum, unsurprisingly, China comes out ahead of the pack, $440.011 billion US in the black.
The ten countries furthest in the black (in US dollars):
China, 440.011 billion
Germany, 235.257 billion
Japan, 157.079 billion
Saudi Arabia, 139.041 billion
Russia, 102.331 billion
Norway, 83.802 billion
Kuwait, 70.594 billion
Switzerland, 44.847 billion
Sweden, 40.429 billion
Libya, 39.217 billion
The ten countries furthest in the red (in US dollars):
United States, -673.266 billion
Spain, -154.036 billion
Italy, -73.200 billion
Greece, -51.482 billion
United Kingdom, -45.392 billion
France, -45.327 billion
Australia, -42.833 billion
Turkey, 41.416 billion
India, -33.330 billion
Portugal, -29.437 billion
However, as bad as that may look, there is a silver lining. The US may be languishing far behind everyone else financially, but the actual amount we are in the red is only a fraction of what the national debt claims. The $673.266 billion in account balance is only 5% of what the national debt of $13.45 trillion shows. That means it's that much easier to pay off.
And furthermore, while the last time we were debt-free was in 1835, we were a creditor nation not very long ago at all. According to the IMF, the US was in the black as recently as 1991, when our account balance showed a surplus of $2.895 billion. So it is possible.
We don't need to become debt-free. Almost nobody is. We just need to have more money coming in than we have going out. And we've done it recently enough that some members of Congress who were in office at the time are still around.
Now can we do it again?
Subscribe to:
Posts (Atom)