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Wealth of Nations- Government Assets Minus Liabilities Analysis

Economics / Global Economy Dec 05, 2008 - 04:42 AM GMT

By: Mike_Hewitt

Economics Diamond Rated - Best Financial Markets Analysis ArticleThe intent of this article is to compare the net wealth of selected nations. The net wealth figures (actually labeled as 'Net Debt') for the G-7 nations (US, Japan, Germany, UK, France, Italy and Canada) can be found on the International Monetary Fund website here . It should be noted that all of the G-7 countries have greater government liabilities than assets.


Net Debt by Country

* Net debt comprises the stock (at year-end) of all government gross liabilities (both to residents and non-residents) minus all government assets (domestic as well as foreign). To avoid double counting, the data are based on a consolidated account (eliminating liabilities and assets between components of the government, such as budgetary units and social security funds). General government should reflect a consolidated account of central government plus state, provincial, or local governments. Debt data are not always comparable across countries.

The net worth for the non G-7 countries was calculated using the following formula:

Net Worth = Assets (Foreign Reserves + Sovereign Wealth Fund Holdings) -  Liabilities (Public Debt)

The holdings of the sovereign wealth funds were collected from a variety of sources and consolidated below:

Sovereign Wealth Fund(s) by Country

** Temasek Holdings does not consider itself a sovereign wealth fund but for the purposes of this analysis is considered as being one.

Official foreign reserve holdings for 2007 were taken from the IMF website here . The consolidated table summing together foreign Reserves plus the holding from the nation's sovereign wealth fund(s) is shown below.

Official or Estimated Foreign Reserves by Country

The following chart compares the government assets of selected countries when official and estimated foreign reserves are added to sovereign wealth fund holdings. The largest change compared with a similar analysis completed June 30, 2007 is that of China, which has nearly doubled. The UAE has overtaken Japan as holder of the second largest combination of official foreign reserves and sovereign wealth holdings.

Foreign Reserves Plus Sovereign Wealth Fund Holdings (US$ Trillions)

Public debt figures for the non G-7 countries were calculated by taking the Public Debt (% of GDP) figures on the CIA World Factbook site for 2007 and multiplying them by the 2007 Nominal GDP figures from the IMF.

2007 Nominal GDP by Country

The following bar graph compares twenty-four selected countries by means of their respective government's net worth as calculated using the rationale explained above.

Wealth of Nations

The above chart demonstrates some striking differences between the westernized countries and those of Asia and the Middle East. Norway is a notable example due largely from years of surplus resulting from their North Sea oil industry.

Japan is seen to be second in the analysis after the United States despite holding the largest foreign reserves in the world after China. These foreign reserves are debt-financed and not the result of an absolute surplus. They are a result of the government's strategy of issuing yen-denominated debt in order to fund the purchase of more US Treasuries with the purpose of suppressing the yen relative to that of the dollar. This has the effect of maintaining Japan's trade surplus when denominated in yen. The continual process of deliberately devaluating the yen reduces the purchasing power of those citizens who save.

By Mike Hewitt
http://www.dollardaze.org

Mike Hewitt is the editor of www.DollarDaze.org , a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies.

Disclaimer: The opinions expressed above are not intended to be taken as investment advice. It is to be taken as opinion only and I encourage you to complete your own due diligence when making an investment decision.

Mike Hewitt Archive

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