Facts about the World's Role in the US Debt Ceiling Crisis

Sometimes the only way to understand a problem is to step back and view it from a dispassionate distance. We've heard the US media and politicians' commentary on the current partial government shutdown and impending debt ceiling impasse. We've heard from financial experts and business leaders and investors about how raising the debt ceiling is the only reasonable thing to do. We've even heard from China and Singapore about the dire consequences of a refusal to raise the US debt ceiling. Only Europe has been silent. Is this Old World politeness or something else. To answer that question, let's look at debt around the world. We can eliminate the business and financial sectors - they pay their debts or fail and are dismantled. But governments around the world have come to believe, largely after World War II, that they can spend more than they take in from taxes by simply borrowing the rest - that is, creating government debt. This has led to a sense, now being seriously challenged by American conservatives, that government debt is okay if it doesn't exceed a generally agreed upon percentage of gross national product (the total measurable productive output of a country). So, why would Asia be worried about the US national debt ceiling not being raised? Because they own the larger part of America's government debt and would not receive their interest payments because there would be no US government funds to pay them if the debt ceiling is not raised. How much US debt do Asian countries buy : In 2012 -- of the total $5.35 trillion US debt held by foreign governments, China held $1.15 trillion, oil export countries held $0.26 trillion...and so on until we reach the largest European holder of US debt - Switzerland at $0.19 trillion. The next European countries on the list of US debt holders are Belgium at $0.144 trillion and the UK at $0.141 trillion. Asian US debt holdings are large because Asian countries themselves have low levels of government debt. In 2012, China's government debt as a percentage of GDP was 32%. Hong Kong's was 30%. And there was the best European country, Switzerland, at 52%. European countries may not buy as much US government debt because they have large debt levels themselves. Germany's 2012 government debt as a percentage of GDP was 82%. France's was 90%. The UK's was 89%. Spain stands at 85%. Greece and Italy were at 161% and 126%, respectively. Just as a comparison, in 2012, the US debt was 74% of GDP. ~~~~~ So, dear readers - those countries that have money in their public coffers buy the debt of other countries whose coffers are almost empty. And in the case of an American failure to pay interest on its debt, Asian countries would feel the pinch of reduced income more than European countries that borrow less US debt. AND - and it is a big and, if America went into government debt interest payment default, the US Dollar, already low in comparison to other major currencies, would fall even farther. All US debt is held in US Dollars - so not only would Asian US debt holders not receive their interest payments, the total value of their bonds (i.e., their holdings of US debt) would fall as well. Think about that, dear readers, and, barring unexpected events, tomorrow we'll talk about what's really going on in American politics to resolve this very messy US government debt crisis.