Economist public debt figures

michaels

RP you quote these numbers every month or so and each time I reply:

Lets worry about flows as well as stocks. The UK deficit is increasing much more quickly than those of other countries because Mr Brown fiddled the figures, redefining the economic cycle and eventually running a deficit even at the peak leaving a structural deficit of 5-7% of GDP. With Govt revenues of around 40% of GDP fixing a structural deficit on that scale can only be extremely painful - note nothing to do with what the 'stock' of govt debt is.

Rochdale_Pioneers wrote: »

A fun new tool here from The Economist: Global debt by country.

Makes for some interesting reading when you look at debt across the world.

2011 forecasts as % of GDP:

Zimbabwe 390%
Barbados 310%
Japan 235%
Iceland: 189%
Sudan 143%
Lebanon 142%
Italy 140%
Ghana 130%
Belgium 124%
Portugal 124%
Germany 116%
UK: 112%
Ireland: 112%
Israel 107%
Spain 106%
France 102%
Greece 101%
Canada 95%
USA 89%

Is it a great position for the UK to be in? Clearly not. Are we "the most indebted country in the world"? "Uniquely placed" to be sunk by debt? If governments of small poor countries can manage to find cash to borrow, why the idiotic suggestions that we won't be able to as 6th biggest economy in the world?

Looking at the data its pretty clear - this has been a global crash which has landed most of the major economies into masses of debt. Can the world economy - and the UK as a major player - survive that debt without austerity/the IMF/default? Of course - we did last time.

michaels

100% agree and have raised this last time Generali brought up this figure for unfunded liabilities. Funded or not there is a promise that appears to suggest that an increasingly infeasibly large proportion of national output will be given to pensioners in the coming years. If it were funded there would likely be a shift in relative prices (ie the labour of the fewer workers will get bid up by all the saved funds of the pensioners) - where it is unfunded the promises will simply not be kept, trying to raise taxation to a level required to meet all the obligations would just result in withdrawal of labour and negative marginal returns to increased tax rates.

SO funded pensions are a confidence trick - the funds will not go as far as anticipated, unfunded pensions are a ponzi scheme given the demographic forecasts, those receiving pensions now will receive better provision than those paying now.

Only option seems to be to emigrate to a country with a more favourable demographic structure (well we know one board member who has done that) or to try to find a way of saving that will guarantee a level of resources rather than an amount of money - may be by buying foreign assets like the sovereign funds do?

CLAPTON wrote: »

Any decent economist knows that fully funded schemes place the same 'burden' on future generations as unfunded liabilities... yes the mechanisms used to raise the resources are different but the 'burden' remains the same.

Count_Dante

I seem to recall something Anatole Kaletsky said in his Times column - government bonds are not in a beauty competition, they are in an uglyness competition. In other words, you may not think UK government bonds are very nice looking, but wait until you see Italian government bonds, and as for Lebanese government bonds...

I think in the long run, the government should find a way to encourage good quality immigrants to the UK and to encourage middle class folk to breed. Relying on council estate types (ahem) to produce the next generation will fail.

vivatifosi

Old_Slaphead wrote: »

Here's a thought. Given that the Tories & Liberals have committed themselves to public sector pension reform (and presumably Labour haven't...well not until after the election) and anticipating a reduction in pension benefits....what would happen if the public sector 'en masse' decided to transfer their pensions out of the public sector scheme?

That would be scary and deserves a blue head icon :eek:.
In reality there's a relatively good degree of security in having a even a deferred defined benefit pension for the benefits already accrued so they are less likely to move.

In my experience as a DB scheme trustee, very few people transfer benefits and those that do tend to be higher earners who have access to the best financial advisors. The ordinary man/woman in the street are more likely to leave where it is because they don't understand the alternatives/don't want to pay for a financial advisor.

CLAPTON

michaels wrote: »

100% agree and have raised this last time Generali brought up this figure for unfunded liabilities. Funded or not there is a promise that appears to suggest that an increasingly infeasibly large proportion of national output will be given to pensioners in the coming years. If it were funded there would likely be a shift in relative prices (ie the labour of the fewer workers will get bid up by all the saved funds of the pensioners) - where it is unfunded the promises will simply not be kept, trying to raise taxation to a level required to meet all the obligations would just result in withdrawal of labour and negative marginal returns to increased tax rates.

SO funded pensions are a confidence trick - the funds will not go as far as anticipated, unfunded pensions are a ponzi scheme given the demographic forecasts, those receiving pensions now will receive better provision than those paying now.

Only option seems to be to emigrate to a country with a more favourable demographic structure (well we know one board member who has done that) or to try to find a way of saving that will guarantee a level of resources rather than an amount of money - may be by buying foreign assets like the sovereign funds do?

I'm must more of an optimist and don't think things will be bad at all.

People will have to work longer ... no problem as lots of older people would happily work if there were jobs (and of course if we were resource constrained then there would be lots of jobs for everyone)

Technology will make us richer anyway so even if a gretaer proportion of wealth is devoted to the old there will still be an increase in absolute living standards for the working population.

Medical advances will continue and mean older people will be able to stay independant for longer.

Otherwise we are left with the untimate ponzi scheme... the population of the world must continue to grow indefinitely so there will always be lots of young workers to look after the old... surely the way to the total destruction of the world.

Given the two choices.. I would rather tackle the one with zero population growth than one that expands indefinitely