European Union Debt by Country | Hacker News Reader

European Union Debt by Country

github.com

74 pointskghamilton8951 comments

This post seems like it was meant more as a demonstration of the data viz, but to me this is just adding an overly complicated interface to a dataset that doesn't need interactivity. It's easy to show debt vs time for all countries as well as the aggregate in a single plot without drop-down menus: it's called a stacked bar plot.

Here's the stack chart in 23 lines.

https://apps.axibase.com/chartlab/e92a4f6c

It is in fact a demo of declarative graphics at work.

Could you do the stack chart by percentage of the total?

This is the wrong number to look at. It's the face value of the debt, which has no practical value; consider debt at 0% interest with a long repayment plan vs payday loans due today.

International Public Sector Accounting Standards (IPSAS) is the new international standard and makes much more sense; it considers only the market value of your debt, i.e. how much you could find someone to buy it for.

Here is a sample of public debt/GDP ratios from 2013. Clearly, proper accounting drastically affects the results:

http://english.capital.gr/News.asp?id=2321087

I agree there is a difference between long-term and short-term debt. Obviously if you don't have money and your payday loan matures (has to be paid) tomorrow that's different from a loan maturing in 30 years -- when you may or may not have money, and when inflation/deflation may have increased or decreased the absolute value of that debt.

But the graph in your link makes it look like Greece is less indebted than the Netherlands. As the article states, that's because the market value of Greek debt is low (lower than nominal value).

That's because few want to buy it, since many think Greece won't repay its debt. Yes, if Greece defaults on its loans they will go away. But it will have consequences. For example, lending money in the future may be more difficult.

More generally, if a country borrows linearly at some point no one will believe in their ability to repay, so market value will trend towards zero. With your measure the indebtedness of a country will go towards zero (along with the market value of its debt) the more it borrows.

It doesn't make sense. The debt is still there and defaulting on it will have consequences.

> That's because few want to buy it, since many think Greece won't repay its debt.

You don't understand - what it means is I would be willing to take on Greece's debt obligations for an immediate financial compensation much less than the face value. It has nothing to do with their creditworthiness.

Also, because Greece's debt is actually lower than the Netherlands, or at least it was in 2013, I personally think lending them money would be a great investment and I'm not the only one[1]. It's just not an option for political reasons.

[1] http://www.reuters.com/article/eurozone-greece-debt-japonica...

If I'm understanding you correctly, you're not saying its the market value to become a creditor of greece (which would depend on the creditworthiness of greece). Its the market value that you would have to be paid to be willing to become the debtor in place of greece.

Am I right?

That's how I think of it. So according to IPSAS accounting in 2013, Greece's debt is 18% of GDP. If they could raise that much money, they could be debt free, assuming political will.

I agree with this (though not some of the earlier things, e.g. that Greece is less indebted than the Netherlands).

Two observations:

1. If they started buying their own debt back en-masse the price would probably go up (as with any other good where demand increases).

2. The problem of Greece, and other poor countries, is that they have trouble mustering resources. Raising 18% of GDP from a poor population isn't that easy. If Greece was a wealthy country they probably wouldn't have the debt they have.

Yes, Dutch debt is higher (€442 billion versus 321, according to http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=t...), but the economy of the Netherlands is almost 4 times the size of that of Greece (770 billion USD vs 195, according to https://en.wikipedia.org/wiki/List_of_sovereign_states_in_Eu...), and I don't see a huge difference in growth potential between the countries.

Obviously, I meant debt/GDP ratio.

In 2013 Greece had 177% debt/GDP and the Dutch (Netherlands) had 68%.

http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&l...

It seems I have to repeat myself, but let me try again. I think you're missing the whole point of IPSAS - "real debt" isn't the absolute number owed at some point in the future. If I owe you $1B, due a zillion years from now, I'm not really in debt $1B. The only reasonable way to measure debt is based on it's market value.

That's because someone would be willing to trade that debt with me for owing about $1 a year from now. They are equivalent.

Do you have a reference that actually explains the method IPSAS uses to calculate the debt? Everything I'v seen gives a vauge description.

It would indeed be interesting if somebody would write a nice layman's description, but I haven't found one. Here are the official rules:

http://www.ifac.org/system/files/publications/files/B5%20IPS...

"it considers only the market value of your debt, i.e. how much you could find someone to buy it for."

Makes some sense, but I don't see how you can find out what Greece's debt is that easily. Its debt may trade at a 18/175 fraction of its face value, but to properly asses it's value you would have to know what buying back _all_ of it would cost. That likely would be quite a bit more because, if they were to buy back half of it at that value, their debt would trade at a much higher fraction of its face value.

Also, I think the intent of this is to say that a country's debt cannot be larger than what it can pay back. Sounds reasonable, but we don't have a way to determine that number. Should Greece have to sell the Elgin marbles and the rest of the Parthenon to pay of its debt, for example?

I'm sure Greece would at least agree that they should have the right to sell the Elgin marbles. The British Museum, on the other hand, probably wouldn't agree.

Per capita would be interesting to show as well.

Here's the gross gov't debt per capita:

https://apps.axibase.com/chartlab/e92a4f6c/2/#fullscreen

That is more interesting, thank you. I wonder what happened in Ireland.

Deregulation and low tax rates created an outsized financial services industry that fueled a housing bubble which then burst and had to be bailed out by the state, quadrupling the public debt.

http://crookedtimber.org/2010/11/09/cultures-of-impunity/

Bank guarantee and then arm-twisting by EU not to do and Iceland because of possible contagion.

Also welfare and pensions were maintained as the economy shrunk, possibly to prevent unrest.

Google does this quite well: https://www.google.com/publicdata/explore?ds=ds22a34krhq5p_&...

It is impossible to pay this amount of money. For this simple reason the interest rate is zero, almost negative: European central bank is buying huge amounts of national debt. Setting an interest rate of zero is just a trick to lower debt interest payments. EU is doomed.

Can you please explain the reasoning behind your statements better? The way they stand it seems like you say it is impossible to repay the debt because the interest rate is zero. Why would that make it harder to repay?

Finally, why do you follow that the EU is doomed?

They're saying its the other way round - it's impossible to repay, so the rate is set to effectively zero.

I disagree with GP however, and don't think the EU is doomed

The issues are more EMU (Eurozone) than the EU?

EU debt is lower as a percentage of GDP than the US or Japan.

Also quite interesting is that total EU debt stayed ~constant 2008-2016, while in the same time frame US federal debt ~doubled.

The US made a huge fiscal mistake in going on a hyper government spending spree in response to the recession, whereas most European nations heavily locked down spending expansion.

The US did however get new annual economic output the size of Germany's entire economy out of the 2008-2016 time frame. During that time, the EU's economy didn't hardly expand at all, with numerous nations suffering hardship (eg Spain, Italy, Greece, Portugal, Finland). France and Germany also saw essentially zero growth during that time (France lost $400 billion off its GDP due to the dollar, from 2008-2016). It's only just in the last 12 to 18 months that the EU economy is starting to pick up steam.

Which approach is better? I prefer lower debt personally, I would have rather the US lock down spending to population growth in response to the recession; such that we might have closer to 60%-80% debt to GDP today.

Good point there. While I also think that lower debt is very desirable, the US example here seems to show that there is a positive effect to be had from spending as opposed to a strict austerity policy. It's probably a matter of degree and specific circumstances and goals how much spending exactly is most appropriate.

The US solidly off-sets the difference with its ownership of the global reserve currency. Japan, which also has drastically more debt as a % than the US (and without the consistent growth or assets), doesn't quite have that benefit. When the US debases the dollar, a big part of that inflation is absorbed by the global economy (such as via commodity prices going up, or external dollar instrument holders taking some of the punch). When Japan debases the Yen, the hit is almost entirely absorbed by the people of Japan and its economy.

Yes, although an additional factor for the US is their debt figures also only include federal debt, it's more again once you include state level, which doesn't apply in the EU.

Is it necessary to pay this money?

No it isn't. If all the debt is paid in full, the only effect this would have is that the income of the economy would be lower.

The interests are low now because many states don't invest as much as they used to do. So the demand for money is low. And when the demand for something is low, the price for it goes down.

Trying to wrap my head around "the demand for money is low, the price goes down". Genuinely curious.

If an entity doesn't see a good way to invest money, they won't borrow money to make money. This is what they mean when 'the demand for money is low'. If the government borrowed money, they would not make as much on that money as the interest payment to who they borrowed from, so they never borrow the money.

This has the overall effect of reducing money demand, reducing the premium to get that money (the interest rates continue to drop). Everyone though 0% interest was a hard line and you couldn't go lower, until negative interest rates were introduced to try and reverse this trend, which it largely hasn't.

What part of it? You are a bank and try to earn as much as possible with the money your customers gave you. However, states, consumers, and businesses don't invest as much as they used to / don't borrow as much money. What do you do as a bank? You lower your interest rates to try to attract at least some customers. Combine that with exceptional supply due to quantitative easing and you have what you have right now

Lower interest rates cause people to wait for a lower rate, higher rates cause people to take out loans before the rate goes up again. CBs did the worst possible thing with no historic evidence it would work, as usual.

Why is that so complicated? If the demand is low but the supply is high, prices usually decrease.

"Money" is cash now. Price is the interest.

i would state it differently. the ecb sets the interest rate low so that borrowing money is cheap and thus more investments will be made and thus economic activity is stimulated.

Typically governments borrow (= issue bonds) for long term, and gradually replace older loans with newer loans.

So yes, these loans will probably be paid, but they will mostly be replaced with new ones.

But no, there is nothing forcing the countries to repay these loans. You can't really collect from sovereign states if they miss loan payments. (https://en.wikipedia.org/wiki/Sovereign_default)

No. For example, in my country Sweden, a major part of the national debt is between the government and the central bank. Basically, the central bank created money and gave it to the government. Viewing the government and the central bank as a single entity makes that huge debt almost an accounting detail.

"Repaying" all of that would introduce a money shortage into the economy.

Not accumulating any debt (as a state) results in missed investments in infrastructure and other state expenses, wich may be cruicial for the economy. Investment in the energy infrastructure, payed by debt, for example benefits the whole society. Not taking this debt would be foolish since it would impair the development of your country.

Accumulating too much dept (again as a state), results in a 'trickle up' economy, where a significant proportion of taxpayers money goes directly to the banks (in the form of interest). This is foolish too, since the bulk of the population would not work for the development of society, but for the profits of banks.

>> Is it necessary to pay this money?

It becomes necessary, when you reach a critical level of debt. But I also think it is in the interest of both state and economy that a reasonable proportion of debt exists, as long as it does not exceed a certain level. The big question remaining is, what is this certain level?

> Accumulating too much dept (again as a state), results in a 'trickle up' economy, where a significant proportion of taxpayers money goes directly to the banks (in the form of interest). This is foolish too, since the bulk of the population would not work for the development of society, but for the profits of banks.

...what? No, the money goes back to bondholders, who are themselves taxpayers. I guess banks can make some profit along the way, but it's incredibly misleading to say that the primary beneficiary of interest are banks themselves, or that this is even the primary risk with excess debt.

According to the convergence criteria, yes. Those criteria pretty much ensure the inability of the Euro to function properly though [1]

Domestically, not really. Internationally, it depends on a number of factors. [2]

[1] https://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-al...

[2] https://larspsyll.wordpress.com/2017/07/18/the-balanced-budg...

No. It should stay at healthy levels and grow with GDP as long as there are attractive investment opportunities at a national level (e.g., education). The challenge is to determine "healthy"

Think of it as government created inflation, ie a tax on your held currency, and it makes a lot more sense.

Wasn't the fed at zero/negative as well recently?

https://fred.stlouisfed.org/

https://fred.stlouisfed.org/categories/22

https://fred.stlouisfed.org/series/GFDEBTN

http://www.ecb.europa.eu/stats/policy_and_exchange_rates/key...

http://ec.europa.eu/eurostat/statistics-explained/index.php/...

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