The live chart for the “Public Debt to GDP ratio” and “External Debt to GDP ratio” of select countries can found in the US Debt Clock site.
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Source: US Debt Clock
The screenshot above is as of November 6, 2011. For the latest data please go to their website.
The current US National Debt is over $14.8 Trillion. Much of this debt is owed to U.S. residents. Among the external creditors, China is the largest holder of U.S. debt.
The U.S. spends a large portion of its budget each year in the form of interest payments to service the huge debt load. The following chart shows that the U.S. spent $414.0 billion on interest payments in 2010 which is higher than the amounts spent on many Federal departments. One can argue that the high interest expense deprives the U.S. from funding education, innovation , science and technology, healthcare, infrastructure and other important programs.
Source: The Heritage Foundation
The Global Finance magazine has published its first-ever ranking of the Safest Banks in Emerging Markets. While the banking industry in the developed world is struggling to gain some credibility, investors are increasingly focusing their attention on emerging market banks which are much more risk-averse and have better potential for growth. In fact, many developed banks such as HSBC plc (HBC), Bank of Nova Scotia (BNS), etc. are expanding their operations in emerging countries to earn higher profits.
From the Global Finance report:
We evaluate the ratings and total assets of the main players in developing economies to create the rankings—providing an overview of the key banks in each region and which financial institutions offer the greatest security. Winners were selected through an evaluation of long-term credit ratings—from Moody’s, Standard & Poor’s and Fitch Ratings—and total assets of the 500 largest banks in emerging markets.
The rankings clearly show the ever-growing dominance of China’s banks both within Asia and throughout the emerging markets. Chilean and South Korean banks also feature prominently in the rankings, as do those of Kuwait, Saudi Arabia and the UAE.
The Safest Emerging Market Banks 2011:
[TABLE=1048]
Banco de Chile(BCH) and Banco Santander-Chile (SAN) currently have dividend yields of more than 4%. In spite of turmoil in global equity markets since the Global Financial Crisis (GFC) both the banks have performed very well. An investment of $10K five years ago in each bank would have grown to over $28K and $19K respectively according to S&P data.
Though many South Korean banks are present in this list, they are average to poor performers and hence they can be avoided. It is interesting to note that none of the banks from India, Brazil and Russia made it to this ranking.
In August 2010, I mentioned Czech-based Komercni Banka(KMBNY) in an article on foreign bank stocks trading on the OTC market.
Disclosure: Long BCH
Brazil, Russia, India and China vary widely in terms of goods exports as shown in the following graph.
Manufactured goods form a major portion of goods exports for China and South Korea compared to agricultural products, fuels and minerals. Russia’s goods exports is dominated by crude oil and natural gas. India is also a large exporter of manufactured goods exports relative to the other two types.
Source: Brazil as a commodity exporter – opportunities & risks, Markus Jaeger, Deutsche Bank Research
Among the BRICs, Brazil has a more diversified export base even within commodities. Hence Brazil can be called as a “diversified commodity exporter”. After the EU, China remains the largest export market for Brazil accounting for about 15% of total exports.
The general belief among investors that Brazil is a pure “commodity play” is simply not true. Manufactured exports represent about 40% of total exports.
From the Deutsche Bank Research article:
Food and agricultural raw materials make up 2/5 of its goods exports. Brazil is the world’s leading exporter of soybeans, poultry, beef, orange juice, coffee and sugar. The top five export products in terms of value are iron ore, oils & fuels, transport equipment (aircraft), soy and sugar & ethanol. Moreover, Brazil’s agricultural potential is huge. Its potential arable land is estimated at over 400m hectares (FAO), but only 50m are currently being used, and Brazil has more spare farmland than the next two largest countries combined.
Similarly, the recent discovery of so-called “pre-salt (oil) deposits” has the potential to propel Brazil from 15th to 5th place in terms of proven reserves. It will, if successfully exploited, transform the country into an important oil exporter – and provide the government and the economy with a significant revenue windfall. This offers a huge opportunity to accelerate economic development, provided the windfall is spent wisely by investing in education and infrastructure and provided the country can avoid “Dutch disease” related problems. In short, Brazil is very well positioned to benefit from what may be a longer-lasting shift in the global economy: the economic rise of populous and relatively resource-scarce countries such as China and India.
From an investment point of view, Brazil is a better destination than other BRIC countries for some of the reasons mentioned above.
Related ETFs:
PowerShares India (PIN)
iShares S&P India Nifty 50 (INDY)
iShares MSCI Brazil Index (EWZ)
Market Vectors Russia ETF (RSX)
iShares FTSE/Xinhua China 25 Index Fund (FXI)
iShares MSCI Brazil Index (EWZ)
Disclosure: No Positions
The percentage of population living in poverty continues to decline in Brazil but is increasing in the U.S. in recent years.
The following chart shows the decline in poverty and income distribution in Brazil since 1990:
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Source: Economic Survey of Brazil, OECD
The OECD report notes that the poverty rate has declined by half since 1993 and urges urges that the remarkable progress must be continued to further reduce high levels of inequality and poverty. According to OECD data, the number of people living below the poverty line declined from 42.98 million in 1993 to just 21.42 million in 2009.
Brazil is a developing country with a population of 203 million while the U.S. is an advanced economy with a population of 313 million.
The following chart shows the number of Americans living in poverty and the poverty rate from 1959 to 2010:
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Source: U.S. Census Bureau
The sharp differences in poverty levels between Brazil and U.S. are shocking as displayed in the above graphs.
Since 2000, the number of people living in poverty in the U.S. has increased steadily to reach 46.2 million or about 15% of the total population. On the other hand, the number of Brazilians living in poverty stands at about 11% of the total population now.
On a related note, Forbes magazine’s “The World’s Billionaires” for 2011 lists 413 billionaires in the U.S. compared with 30 in Brazil. Forbes also laments that the U.S. is producing billionaires at a slower rate than in the past.
As more and more wealth is transferred into the hands of the top 1% of the U.S. population due to misguided government policies, the unfortunate among the rest of the 99% is further pushed into abject poverty. The social implications of this situation is huge as evidenced by the following report that appeared on the Real Time Economics blog of The Wall Street Journal on November 1, 2011:
Nearly 15% of the U.S. population relied on food stamps in August, as the number of recipients hit 45.8 million.
Food stamp rolls have risen 8.1% in the past year, the Department of Agriculture reported, though the pace of growth has slowed from the depths of the recession.
The number of recipients in the food stamp program, formally known as the Supplemental Nutrition Assistance Program (SNAP), may continue to rise in coming months as families continue to struggle with high unemployment and September’s data will likely include disaster assistance tied to the destruction and flooding caused by Hurricane Irene.
Almost the entire 46 million Americans currently living in poverty are dependent on the state for putting food on the table. This is astonishing since food prices are relatively much cheaper in the U.S. than other countries including most emerging countries.
Update #1:
From a news report released today:
The number of poor Americans hit a record 49 million in 2010, or 16%, according to new data released on Monday that showed poverty rates for the elderly, Asians and Hispanics higher than previously known.
The figures were calculated by the Census Bureau under a broad new measure intended to supplement the official standard with a fuller picture of poverty in the United States. Results contrast with official poverty data, released in September, that put the number of poor Americans at 46.2 million.
The biggest rise occurred among people aged 65 and older who are being driven into poverty by out-of-pocket medical expenses, including premiums and co-pays from the federal government’s Medicare program for the elderly.
Update #2:
From a Center on Budget and Policy Priorities report titled “Poverty and Financial Distress Would Have Been Substantially Worse in 2010 Without Government Action, New Census Data Show” :
Six temporary federal initiatives enacted in 2009 and 2010 to bolster the economy by lifting consumers’ incomes and purchases kept nearly 7 million Americans out of poverty in 2010, under an alternative measure of poverty that takes into account the impact of government benefit programs and taxes. These initiatives — three new or expanded tax credits, two enhancements of unemployment insurance, and an expansion of benefits through the Supplemental Nutrition Assistance Program (SNAP, formerly called food stamps) — were part of the 2009 Recovery Act. Congress subsequently extended or expanded some of them.
Hence the total number of persons in poverty would have been even higher last year if not for the six government initiatives.
Update #3: Brazil divided over an emerging middle class
From the BBC report:
Brazil’s economic success story has not only lifted millions of Brazilians out of poverty. It has also raised the expectations of a new lower-middle class – known here as the “C class”.