(Bloomberg) -- The U.S. economy is consistently ranked among the
world’s strongest. But cut off its addiction to debt and exhaust its gold and
currency reserves, and a very different picture would emerge.
The
nation’s health as measured by gross domestic product per capita would plunge
into negative territory without its dependence on borrowed money, according to
data compiled by Bloomberg.
In
fact, the U.S. would fall almost to the bottom of a ranking of 114 economies by
GDP per capita. Only Italy, Greece and Japan would fare worse. That’s a seismic
shift from America’s comfortable No. 5 spot on a list based on conventional
measures.
To
get this somewhat dystopian measure, Bloomberg took each economy’s 2020 GDP as
projected by the International Monetary Fund as a starting point. We then
adjusted the number by removing the ability to borrow, while adding reserves to
create an alternative wealth measure.
U.S.
per capita income of $66,900 would be slashed to a negative $4,857 using this
measure. That’s a total loss of almost $72,000 for every man, woman and child.
The
U.S. isn’t alone, though; it’s pretty grim across the board. Among the 114
economies included in the final list, 102 would experience reduced per capita
wealth if they suddenly lost the ability to borrow.
Japan
ranked dead last, with more than $93,000 of income erased per person. Its
per-capita income of $43,701 in 2020 would flip to a negative $50,000 and its
rank on the list would plunge 96 spots, from 18th to last.
Nor
is the U.K. immune in the alternate, borrowing-free universe. With debt and
reserves at 83% and 5% of GDP, respectively, its economy would see per-capita
wealth drop 10 spots to No. 29 in this measure - from $43,522 to $9,779.
China
would see its relative ranking gain a few spots, since its holdings of gold and
foreign currency are the world’s largest at $3.36 trillion or roughly 22% of
GDP. That dwarfs second-place Japan, with $2.1 trillion.
Luckily
for Americans, a debt-free economy is unlikely to happen anytime soon. Even
with growing trade wars against China and others, and the Trump
administration’s projected $1 trillion budget deficit in fiscal 2020, the U.S.
debt market allows for ample liquidity and the U.S. dollar is considered the
world’s reserve currency.
The
U.S. will need to continue to borrow. The IMF projects America’s government
debt to average 109% of GDP over the next five years. Reserves, having averaged
$425 billion between 2014 and 2018, would account for less than 2% of the
projected $22.2 trillion GDP for 2020.
For
full data set, click HERE
To
contact the reporters on this story: Vincent Del Giudice in Denver at vdelgiudice@bloomberg.net;Wei
Lu in New York at wlu30@bloomberg.net
To
contact the editors responsible for this story: Alex Tanzi at atanzi@bloomberg.net, Virginia Van
Natta, Ros Krasny
For
more articles like this, please visit us at bloomberg.com
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Bloomberg L.P.
