Global GDP, Spending, Deficits and Debts

Imagine you were on the moon and look at this beautiful blue planet spinning with its entire view; you may want to know how the Earth is doing?  Financially? 

You have to take a global perspective to check how the earth is doing and how its major countries are doing.

There are about 6.8 billion human beings living on the earth today, still non on the moon.  The four largest economies on this planet are European Union, United States of America, China, and Japan.  The European Union is composed of 27 countries: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Romania, and United Kingdom.

Over the last couple of years, there has been a major financial crises starting in the United States and impacting almost every nation on earth.  As a result, the world total GDP as a whole has very little changes.  The global GDP was $61 trillion dollars in 2008 and remained $62 trillion dollars in 2010.  That is about $9000 dollars "GDP" for every person on earth.  The world economy has started to grow again this year, and in 2014, the global GDP is expected to reach $77 trillion dollars.  Obviously, the growth rates of these top economies are not all the same.  Whereas the European Union sees the biggest drop in the world GDP share from 30% to 24% between 2008 and 2014, China is growing its GDP and the corresponding share dramatically from 7% to 12% in the same period.  Nevertheless, these four major economies will contribute to more than 65% of world total GDP.

On average, governments around the world spend about 38% of the world GDP for their correspondent nations.  This ratio will remain steady in the foreseeable future, indicating the super-sized importance of the government role for the world overall economy.  Equally astonishing is the super-size of the government deficits.  It seems that most governments love to spend more than they can make.  This is especially true for the “advanced economies”.  In 2010, European Union as a whole is running a deficit of 4.5%, Japan is running a deficit of 7.5% and the USA is running at a remarkable more than 10% deficit of the national GDP, or $1.5 trillion dollars.  In comparison, the state deficit in China is around 3%.  The national deficit is a measure of government financial strength.  It directly affects nation's inflation rate, fiscal and taxation policies,  and other countries around the world.

Government deficits over the years will add into significant accumulation of national debts.  Whereas the US is having the most debts in 2010 around $13.5 trillion dollars, the total debts of the entire world is nevertheless an astonishing $47 trillion dollars.  That is more than ¾ of the entire world GDP in 2010, or close to $6800 dollars for every person on earth.  Although Europe has been hunted with the debt crisis, its total debt is actually lower than that of United States, i.e., 77% vs. 93%.  At the extreme and surprising side, Japan has the most national debts among the major economies, i.e., above 220%.  Fundamentally, significant debts are results of borrowing money heavily from future generations.  Ultimately,  it will bring down the future standard of living since the youngest have to repay the borrowed money eventually or the country goes bankruptcy.  To make things even worse, European Union, US and Japan will all see their national debts increase over the years to come.

How can future generations pay for all these reckless borrowing and spending?

Now you wish you actually live on the moon!