Question

How does the United States debt compare globally to other nations? Identify why some other nations have less debt than the United States. Explain why.

Answer 1

Globally US is at the top of the list when it comes to external debts numbers. The rank is followed by United Kingdom and some other European countries , japan , china etc. The US economy has a history of high rates of external debts. The economy of US functions with political motives. With elections coming up , the focus on reducing the external debts seems to be very less.

The question is what policies make the external debt so high , so as to say , highest in the world.?. The US economy spends considerably on Medicare and the tax collection rates are also not very high. This creates a deficit in the economy . Further high frequency of trade function in the country, with US being major importer of many goods from countries across the globe , majorly for importing low cost primary goods from countries like China and India. The speculations of the the US economy falling into a deficit trap and unable to recover is very low , even with figures not being in favour of the odds . Thus the investors keep on investing seeing US as a major market for their products.

Other nations might have less debt than US because of many reasons like high tax rates , low govt spendings , low investment rates , low trade dependency and globalisation , etc. Some nations , although seem to have a low debt doesn't necessarily indicate a booming economy. Hence this factor alone could be misleading if economies are compared on grounds of just the debt situation.