A fascinating, but largely useless, PIIGS debt graphic from The New York Times:
The big problem with this graphic is that it goofs in a serious way. The focus of this graphic is how much the PIIGS owe to each other (the pentagon and its interior), when in fact the real problem is how much they owe – and might not repay – to the more stable economies (these are the arrows going to the outside).
A secondary problem is that those outgoing arrows are gross totals – there’s nothing here that shows, say, that France probably owes something to Italy – and that this should be netted out.
A third problem is the lack of scaling. These debt figures are stocks, and are not due all at once. For scale, these should be compared to some measure of national assets. Unfortunately, they’re usually compared to GDP – although not at all in this diagram. That’s a bad move because it compares stocks to flows. If they really wanted to solve this problem, they’d compare debt payments to GDP.
To draw an analogy, the circles are college students, the pentagon and its interior lines are how much you owe to each other, and the outgoing arrows are how much you owe to your parents, banks, and Sallie Mae. The big questions for a college student are not how much they owe to other students, but rather how much they owe to non-students, what is their ability to pay depending on their future prospects, and how much inflow can they expect to get from their parents (say through a will or trust). This graphic focuses on how much college students owe each other.
Via Marginal Revolution.
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