Debt-to-GDP Ratio

Ben Franklin had his famous quote about death and taxes. He could have added debt to the list of universal things. In fact, debt is probably more universal. People have debt. Companies have debt. And countries have debt.

Countries might not have to pay taxes and they can go a long time without dying, but just like you owe your buddy that $10 bucks for KFC last week, the U.S. owes billions to China (for pretty similar reasons actually).

But given that countries can operate economies valued in the trillions of dollars, how to judge how much debt is too much? Once the numbers get that extreme, it's like hearing how much an NBA player is making. The brain loses any sense of scale and you just start thinking ahead the next draft day and/or election.

However, there is a number for judging a country's debt load (See: Debt Load). It's called the debt-to-GDP ratio.

GDP stands for "Gross Domestic Product." This number gives an overall value for a country's economy. By comparing the country's outstanding debt to the size of its economy (via GDP), the debt-to-GDP figure gives a look at how easy it is for a country to handle its level of debt.

See: Debt Per Capita.