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Some good examples
Liechtenstein - no external debt
Hong Kong, Estonia & Chile all non-petroleum exporting countries with Debt-to-GDP ratios under 4.00%. The United States’s Debt-to-GDP ratio is 64.70%, not bad compared with 176.20% for Japan or 200+% for Lebanon.
Tiny Hong Kong & Singapore have over $130Billion worth of foreign reserves. Nearly twice as we in the United States. Remember, we’re a country of 300,000,000.
Sovereign Wealth Funds, only the State of Alaska has one of any significant size. Many other emerging nations have decided to create Wealth Funds. Again, we see Singapore doing amazing for such a tiny island state. The United Arab Emirates have nearly $1TRILLION, amazing. My guess is that they’ll exceed Japan’s nearly $1.4Trillion shortly. [It should be noted that Japan’s private non-governmental assets are still probably in the tens of Trillions, thankfully, it’s estimated that America’s private assets may be valued at over $125Trillion, yet there is no Federal Wealth Fund]
Oh one cautionary note, Japan’s insanely large debts will become a nightmare if global interest rates rise. Imagine if Japan defaulted on their national debt. They will be FORCED to sell our bonds. Can you say 21% mortgages? For those that forgot, America encouraged Japan to go into debt. Why? To spend and prop up our economy. I’m not joking. Interest rates are probably still around 1%, so in theory, Japan could afford a $100Trillion Debt, because the interest payments would only be $1Trillion. If their interest rates ever got up to say 6%, well, bye bye Japan. Remember, Japan’s population is aging, they don’t have many immigrants and their population is in decline. Don’t count on a Chinese or Singaporean bailout of Japan. *coughs WW2*
The other reason why Japan’s debts are huge as compared with their GDP is because of politics. If you’re in office, why raise taxes when you can borrow so cheaply? I’ll save the rest for a future article. It’s complicated and very scary. Our Federal Reserve is almost conservative. Let me stop there.
Conclusion, we need to become debt free and regain our position as the World’s Largest Creditor Nation, which we once held. We can easily do this. America has the resources, the entrepreneurial spirit and most of all, an extremely mature market place. What we lack is the will. Ron Paul 2008
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