A Few Thoughts on Public Debt Growth
The chart does not tell the whole story.
1) More US dollars are used as a reserve currency then euros (still).
2) The US dollar is controlled by the government of one country, the euro is not. And as the current situation shows, it is very difficult to get the euro zone countries on the same page.
3) Chinese Central Bank announced a few weeks ago its intention to reduce investments into euro zone debt holdings (although later the statement was corrected).
4) Such a ‘friendly’ country like Iran decided to switch from the euro to the US dollar when trading oil.
5) The chart misses one important limit. The public debt cannot grow forever. It grows as long as treasury bills offer returns relative to devaluation of the currency. And this margin erodes quickly.
6) GDP growth of a single country does not really show anything. If the world’s GDP grew, say 5%, but the GDP of a country grew, say only 2%, that is not growth, that is loss.
But this discussion is like who is better among bad. What I would look at is why the G8 share in the global economy keeps shrinking and check the share of which countries is growing in the recent years and why.