Australia, Canada, and Scandinavia: The Safest Bets in an Unsafe World

Australia, Canada, and Scandinavian countries share two important traits that should make them excellent places to invest/store capital in the coming years.  First, they boast strong and entrenched middle classes, which will guarantee a kind of political stability that can't be relied upon in other parts of the world. And second, their governments are in far less debt than their developed world counterparts (e.g. the U.S., U.K., Japan, European "peripherals").

Here are two fascinating charts to illustrate these points.

The first is a map of the world with countries colored according to their GINI coefficient.  The GINI coefficient is a measure of income inequality where 0 is complete income equality (everyone makes the same amount of money) and 1 is perfect inequality (all the country's income accrues to a single earner).  The higher the number, the greater the income inequality.  This map is interesting in that Europe, Canada, Australia, Scandinavia, and parts of central Asia (the green parts of the map) are really the only places in the world where one could say that a strong, practically unassailable middle class exists.

The second is a chart from Pimco's web site showing the debt-to-GDP ratio of a number of countries.  Notice that Australia, Canada, and a handful of Scandinavian countries look downright safe compared to the powder kegs represented by the U.S., U.K., Japan, and the so-called "peripheral" countries of the EU.

A third trait Australia, Canada, and Scandinavia share is that they are all major commodity producers, which makes them good plays on the commodity super-cycle that we are likely in at the moment.

Given all this, I would argue that if you're looking for places where debt defaults and political unrest are least likely to be a problem in the future, then Canada, Australia, and Scandinavia are what you seek.  This doesn't mean that those regions won't be affected at least somewhat by a sovereign default or political turmoil elsewhere in the world.  But, the odds are that they will be affected less than most.