Country Debt

By J.D. Neeson, President, Marine Parts Express

It struck me the other day that everyone talks about government debt and how much personal debt people have, but I had never seen what the total debt is. So here is a nifty table showing some of these. All the numbers are a percentage of a country’s GDP and are estimates.

Country	% GDP	% Government Debt	% Business/Bank Debt	% Household Debt
UK	497	77	340	80
Japan	492	213	226	53
Spain	366	66	210	90
France	341	88	223	30
Italy	313	110	165	38
South Korea	306	30	186	90
US	289	80	124	85
Germany	284	86	149	49
Canada	274	68	118	88

So, in the United States, the total debt is 289% of GDP and out of this number 80% of GDP is Government Debt, 124% of GDP is Business/Bank Debt and 85% of GDP is Household Debt. Or, to phrase it another way, as a percentage of total debt, which is a bit more revealing of the government and societal pressures that countries have to deal with and the decisions that are made either consciously or unconsciously.

Country	% Government Debt	% Business/Bank Debt	% Household Debt
UK	15	68	16
Japan	43	46	11
Spain	18	57	25
France	26	65	9
Italy	35	53	12
South Korea	10	61	29
US	28	43	29
Germany	30	52	17
Canada	25	43	32
Average Rate	26	54	20
Median Rate	26	53	17

There are all sorts of observations and deductions that can be made from these numbers. For example, I think what it shows is that while Japan and France have relatively low Household Debt they have higher than average Government and Business/Bank Debt. But the reasons for this are different. Japan has a history of high personal savings, but the country has been forced to keep society afloat through government support of its industries.

The French, on the other hand, have forced their industries to keep artificially high wages and benefits by government edict. That has kept Government Debt down, but has forced businesses to take up the slack. Much of the needs of the French people are supplied by either the government or by their employers, so personal debt is lower.

Another example is South Korea and the United Kingdom, both of which have relatively low Government Debt. Again, it is for different reasons. The Koreans are much more hands off when it comes to economic issues type forcing industry or households to take on the debt risk, while the U.K. form of socialism controls the economy more closely and forces industry to take on the debt.

You notice none of these broad generalizations include efficiency or value considerations and there are all sorts of other factors that create the choices that countries make. The only aspect that seems clear is that less debt is better than more debt and more capitalistic economies seem to spread debt risk over the entire economy more than the socialistic countries that either dictates the entity that will be the debtor or take the debt onto themselves.

I have no idea which is better, but this decision may affect which class of borrower has the most say in the governing of the country. In all cases, the beliefs and societal mores can tie the hands of decision makers more effectively than laws passed.

I would love to find the same sort of numbers for China, Dubai, or some other very strictly controlled economy more totalitarian form of government and compare it with the numbers for Sweden or Denmark. And wouldn’t poor Greece’s or Portugal’s numbers be fun to look at?

~J.D. Neeson

For all your marine engine parts needs, call us toll free at 877.621.2628, or outside theU.S., 207.882.6165.

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Marine Parts Express is a division of Water Resources, Inc., a privately held Maine Corporation

Wheel Turns

By J.D. Neeson, President, Marine Parts Express

When I was working for a large manufacturing company in the 1980s, the dreaded juggernaut on the horizon was the Japanese. Everyone thought it would be only a matter of time before all manufacturing would end up on the Japanese shores, due to the Japanese’s relatively low labor rates and their adoption of new manufacturing techniques. What eventually happened, of course, was that all those Japanese workers began to enjoy having a little more money and began to want a little more.

Then, within five to seven years, there was a great move afoot to move manufacturing to South Korea, where the Koreans’ relatively low labor rates and their adoption of new manufacturing techniques made them the darlings of manufacturers.

So, I greeted the recent news regarding China’s concern over the number of companies that were moving to Vietnam, Myanmar, and Cambodia, with their relatively low labor rates and their adoption of new manufacturing techniques, with gentle pleasure and not-so-gentle satisfaction.

Apparently, wages in China have risen 158 percent over the last 10 years or so, and 11 percent in the last year alone. The Chinese have begun to try a number of what they call “adjustment strategies.” One strategy is to transition towards high-value, low-labor manufacturing (i.e. fewer workers and more robots), but what happens to all those workers that are displaced?

Currently, approximately 300 million of China’s 1.3 billion people are involved with manufacturing, or 23 percent of the population (the United States’ percentage is 3.5 percent), and they are unlikely to be happy campers. Just think how much excitement is generated in the U.S. on this issue and then multiply that by seven. (Incidentally, the total manufacturing output of the two countries is almost identical.)

Once workers have had a taste of the apple it is just about impossible to take it away from them. I bet the Chinese leadership lie awake nights thinking about what might happen if growth slows and unemployment increases and a whole bunch of people look toward Peking for answers.

On a side note, during the ’80s when all of us in the U.S. manufacturing world were frantically trying to imitate the Japanese, I always had the vision of a bunch of guys in Tokyo sitting around a big table discussing what they could make the foolish U.S. guys do. One might say something like, “Let’s convince them we all do jumping jacks every morning.” Another guy would say, “Oh, that’s good. I know, I know—let’s tell them we use little red cards for tracking.” And one of the other guys would say, “I have a cat called Kanban, so why don’t we call it that.”  Then they all giggle and drink their sake.

~J.D. Neeson

For all your marine engine parts needs, call us toll free at 877.621.2628, or outside the U.S., 207.882.6165.

Comments? Questions? Suggestions for topics for our blog or newsletter? Send them to info@marinepartsexpress.com.

Marine Parts Express is a division of Water Resources, Inc., a privately held Maine Corporation

Things I Found While Looking for Something Else—Part 1

By J.D. Neeson, President, Marine Parts Express

The U.S. and China’s manufacturing output is about the same—the Chinese do it with approximately 300 million people, while the U.S. does it with 11 million workers.

Over the summer, amidst all the yelling about the debt crisis, foreign demand for U.S. Treasuries grew by $88 billion (even though China sold around $36 billion, England purchased $44 billion). Even with the downgrade, the U.S., with its economy, is the only nation big enough to absorb so much cash. Right now, foreign ownership of  U.S. Treasuries is around $4.6 billion, which is a huge amount, but Americans own more than this amount of U.S. Treasuries, so the country isn’t really owned by the Chinese.

With all the gnashing of teeth about big evil China and how it will take over the world, it is sort of nice to remember that the GDP of the U.S. is almost three times (3x) larger thanChina’s, as indicated below.

(2010 numbers)

U.S.        $14.526 trillion

China       $5.878 trillion

Japan       $5.458 trillion

Germany   $3.386 trillion

France      $2.512 trillion

U.K.          $2.250 trillion

Some of our intrepid politicians bemoan the planned increase in the minimum wage rate stating that these raises hurt businesses and reduce job growth. However, the statistics seem to say something different. In 2008 only 3% of all workers made minimum wage. By 2010 the amount had jumped to 6% of all workers, but the Federal minimum wage had grown from $5.15 to $7.25, so most of the jump was probably from the fact that the minimum wage had gone up, while wages themselves had kept flat. In any case, it is pretty small number of people.

My stepson is convinced that Social Security will be gone by the time he retires. And he is not alone. Egged on by the doom sayers and special interest groups, an entire generation believes that SS is on death’s door. Actually, the Social Security system is fine for the next 25 years or so. From now until around 2022 there will be a surplus of collections over payments. In the year 2035, give or take, the surplus finally disappears, but there is still enough money in the fund to supply full payments through 2055 or so.

And this assumes that Congress won’t do something to fix it. My bet is that they will eliminate the maximum wage payment and will force people making over the roughly $110,000 maximum to continue to pay SS and Medicare up to their actual salaries and increase the retirement age to around 70. These two changes alone mean the fund is solvent through 2099.

End Part 1

For all your marine engine parts needs, call us toll free at 877.621.2628, or outside theU.S., 207.882.6165.

Comments? Questions? Suggestions for topics for our blog or newsletter? Send them to info@marinepartsexpress.com.

Marine Parts Express is a division of Water Resources, Inc., a privately held Maine Corporation