Is U.S. Debt Really All That Bad, Comparatively Speaking?

by: Vincent Fernando, CFA

Your contrarian alarm should always go off whenever everyone in the world agrees on a market outlook. The same thus might apply to the outlook on the US dollar and America's financial health. Is the US debt really all that bad, relative to other countries in the world? If many other countries have similar amounts of debt relative to their GDPs, then how is the dollar doomed against their currencies?

Also, beyond debt to GDP, one needs to consider long-term growth factors as well. The US doesn't face a demographic time bomb the way China does, or a purely dying population as Japan. The graphic below, courtesy of Visual Economics, sheds some light on the US debt situation relative to some other high debt nations in the world.

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