Debt to GDP ratio and Development
I was reading an article on the election results in Jamaica this morning, apparently the opposition has won the elections with a thumping majority against what was forecast to be a close result.Anyways, the point of interest was that, this time around economy was the key election issue - over shadowing 'violent crimes' that used to hog the election debates in the past. So what is with the Jamaican ecenomy ? In terms of numbers the government debt stands at 130% of the GDP and going by the report from BBC, the people of Jamaica think this is a big deal.
I set out to do some research, to get a perspective on this and to form an opinion on my own on if this is really a big deal. I first compare the salary to loan ratio that me and my peers have and found that did not help. Most of us are worse off than Jamaica and are not worried to say the least and are mostly behaving as rich people do. Next on I leave the personal analogy and brush up my macro economic fundamentals - I look up definitions of GDP, Inflation and Government debt and although I find numerous versions I am satisfied they are close to what I had in mind, only mental note I make is that "GDP" , generally refers to GDP that is already adjusted for Inflation (good !!).
I continue to google and wiki around and stumble on this amazing graphic (Link 1 : http://en.wikipedia.org/wiki/File:Public_debt_percent_gdp_world_map.PNG) (Caution : it is from 2009). I compare the graphic with a night time photo of earth taken from space (Link 2 : http://apod.nasa.gov/apod/ap001127.html) (Vorsicht ; this is from 2000 !!) and make the following observations, questions
1) The brightly lit countries (in simple terms the "rich"/ developed countries) , generally speaking have a high debt to GDP percent
- This could be because the rich find it easier to get debts and conversely the poor find it difficult to get loans (Italy as example of former and Sub Saharan Africa as example for latter)
2) There are very few countries of notable size that are 'Green' on Link 1 and well lit on Link 2. Examples : China, Brazil, Russia, Sweden
- It will be useful to device a measure of some sort to link data on these two Links (pun unitended) and thereby have a truer measure of development that is not debt correlated
3) What is the underlying dynamics of this ? Does it take more money for the countries with high per capita GDP to retain that and grow compared to what it takes for a country with lower per capita GDP. Does it take a rich person more money to continue to get richer / maintain to be rich than it does for a poor person to get rich ? where does the threshold lie ? Is it right to say that the debt that the rich countries take are actually 'Operational expenses of the wealth / quality of life / environmental and safety standards " they maintain ?
And Jamaicans out there - nothing to worry about , as per World Bank , debt to GDP ratio of up to 150% is not worth worrying about !!
M
P.S: What is with Canada ? I can't find any reason as to Why Canada is deep red on Link 1 !!
I set out to do some research, to get a perspective on this and to form an opinion on my own on if this is really a big deal. I first compare the salary to loan ratio that me and my peers have and found that did not help. Most of us are worse off than Jamaica and are not worried to say the least and are mostly behaving as rich people do. Next on I leave the personal analogy and brush up my macro economic fundamentals - I look up definitions of GDP, Inflation and Government debt and although I find numerous versions I am satisfied they are close to what I had in mind, only mental note I make is that "GDP" , generally refers to GDP that is already adjusted for Inflation (good !!).
I continue to google and wiki around and stumble on this amazing graphic (Link 1 : http://en.wikipedia.org/wiki/File:Public_debt_percent_gdp_world_map.PNG) (Caution : it is from 2009). I compare the graphic with a night time photo of earth taken from space (Link 2 : http://apod.nasa.gov/apod/ap001127.html) (Vorsicht ; this is from 2000 !!) and make the following observations, questions
1) The brightly lit countries (in simple terms the "rich"/ developed countries) , generally speaking have a high debt to GDP percent
- This could be because the rich find it easier to get debts and conversely the poor find it difficult to get loans (Italy as example of former and Sub Saharan Africa as example for latter)
2) There are very few countries of notable size that are 'Green' on Link 1 and well lit on Link 2. Examples : China, Brazil, Russia, Sweden
- It will be useful to device a measure of some sort to link data on these two Links (pun unitended) and thereby have a truer measure of development that is not debt correlated
3) What is the underlying dynamics of this ? Does it take more money for the countries with high per capita GDP to retain that and grow compared to what it takes for a country with lower per capita GDP. Does it take a rich person more money to continue to get richer / maintain to be rich than it does for a poor person to get rich ? where does the threshold lie ? Is it right to say that the debt that the rich countries take are actually 'Operational expenses of the wealth / quality of life / environmental and safety standards " they maintain ?
And Jamaicans out there - nothing to worry about , as per World Bank , debt to GDP ratio of up to 150% is not worth worrying about !!
M
P.S: What is with Canada ? I can't find any reason as to Why Canada is deep red on Link 1 !!
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