Total Debt as a Proportion of GDP

Generali

This graph shows total debt by country as a proportion of GDP:



This was actually used to show that Japan isn't necessarily as FUBAR'd as people say. Of course you could equally use it to say that the UK is as FUBAR'd as Japan.

My personal opinion is that the problems the Japanese economy has faced over the course of the 'lost decade', which has lasted almost quarter of a century, is:

1. Not as bad as people think
2. Caused almost exclusively by demographics

Those same demographics are going to overtake China, Germany and Italy (in that order IIRC) over the next 10 years or so. Feel free to throw this back in my face if I'm wrong.:D

For better or worse, the UK and US are dodging the demographic timebomb via immigration

The source of the graph is the FT website quoting McKinsey.

CLAPTON

Whatever the graphs show, they do not seem to support the view that high total debts levels are due to the 'demographic time bomb'.


Of course for Japan in particular, that may be true although there is nothing here to support that.


It would seem to show either nothing at all or that debt levels have little impact on overall economic activity

Generali

CLAPTON wrote: »

Whatever the graphs show, they do not seem to support the view that high total debts levels are due to the 'demographic time bomb'.


Of course for Japan in particular, that may be true although there is nothing here to support that.


It would seem to show either nothing at all or that debt levels have little impact on overall economic activity

All they really show is an increase in debt over time. The rest was some idle thoughts I had.

pertgave

The high levels of debt in Japan (or Italy) are not due to the over-aging society. The over-aging population and shrinking workforce will make it difficult for Japan, Italy and even Germany to pay off their debt.



1. UK has the biggest deficit in EU

2. Borrowing is +10%

3. It will get worse http://econ.st/1vCdaQs

Luckily, the UK's working age population is growing through immigration...

antrobus

Generali wrote: »

This graph shows total debt by country as a proportion of GDP.....

Yes, but that's 'total debt', which doesn't necessarily have anything to do with demographics.

As in, UK public sector debt is now about 90% of GDP, compared to 227% for Japan, and the reason that the UK total external debt is as high as 400% to 500% is because we have a lot of banks.

There are countries in the world that have even higher ratios. Luxembourg and Ireland, spring to mind.

michaels

Surely it also matters whether it is internal or external debt, internal debt is just accounting entries showing we will have to transfer money from some citizens to others (whilst no doubt the tax and benefits system transfers it back in the opposite direction)

Also how we fund pensions may matter - with a PAYG scheme like state pensions then the economy will have less savings and less debt compared to a pension fund scheme although the actual 'promised' liabilities may be similar.

Thrugelmir

Japan's problems eminated from credit expansion inflating asset values. Japanese banks used to hold Company shares as security for debt. So as Japanese companies grew, share prices increased. Not least as demand from investors such as the UK Life & Pension Funds took hold in the late 70's.

As share prices rose. Then banks lent more against the value of the assets they held to the Companies they held investments in.

Was only going to be a matter of when the bubble would burst. (Said with hindsight).

Aging population is a reason that the problems have rumbled on. Like the UK and Europe as a whole. There's a post war baby boom that's feeding it's way through the system right now.

kabayiri

I wonder if demographics will be as big an issue in a decade or 2's time?

Is it not reasonable to expect technology to extend the working life of an individual?

It seems pretty unreasonable to expect someone to spend 25% of their adult life unproductive at the end of it.

What happens when medical advances pushes life expectancy into the 90s? Are we to commit to ever greater replacement of the labour force. What if these people show reluctance to come? It will take wage increases to attract them. Won't this push up wage inflation?

We have a friend - well paid teacher - who will retire in their mid 50s. There is every possibility that this person will live for 30+ years. Is that a sustainable pensionable situation? People don't lose their ability to teach that quickly do they?

It feels like a lot of things are broken.

Generali

kabayiri wrote: »

I wonder if demographics will be as big an issue in a decade or 2's time?

Is it not reasonable to expect technology to extend the working life of an individual?

It seems completely reasonable to me when talking about a teacher. I suspect that manual labourers will be sucked in to the coming Zombie Apocalypse of manual labourers.

kabayiri wrote: »

It seems pretty unreasonable to expect someone to spend 25% of their adult life unproductive at the end of it.

So for your friend. In education/child care from 2-22. Works from 23-55. Retires from 55-80.

32 working years is meant to sustain life for 80 years. Hmm

kabayiri wrote: »

What happens when medical advances pushes life expectancy into the 90s? Are we to commit to ever greater replacement of the labour force. What if these people show reluctance to come? It will take wage increases to attract them. Won't this push up wage inflation?

We have a friend - well paid teacher - who will retire in their mid 50s. There is every possibility that this person will live for 30+ years. Is that a sustainable pensionable situation? People don't lose their ability to teach that quickly do they?

It feels like a lot of things are broken.

We have to adjust to new times. What we were promised is no longer realistic and lots of older people will have to adjust to that.

Bricklayers can have apprentices. Firemen can teach the next generation of recruits. Coppers can be moved into desk jobs. If you want to live to 85-90 which is likely for anyone who is 40 and reading this then you have to pay for that. Everything needs to be paid for, pretty much.

kabayiri

Generali wrote: »

...
We have to adjust to new times. What we were promised is no longer realistic and lots of older people will have to adjust to that.
...

Politicians seem ever so keen to promise a return to the good times, and I'm not sure if this is possible.

We have a world of competition for all resources now, including labour.

Old people can live pretty frugally in my experience. The problem is that the pension industry creates an expectation which only a relative few will achieve. Perhaps we need to look at the issue as a whole, and not piecemeal solutions.

lisyloo

Is it not reasonable to expect technology to extend the working life of an individual?

Anecdotally I'm not convinced.
People bodies start breaking down at around 60.
The fact that we can cure certain cancers (for example) doesn't stop those people having bad joints, poor mobility and general heath problems assocaited with ageing.
It's all very well to say you can move to a physical job to a desk job, but many people will find their bodies and minds not working as well as they once did as well as needing more sick time. How many employers are willing to have employees taking increased sick time and time off for doctors/hospital appointments?

I do agree though that we can't just expect a longer retirement.
Personally I'm willing to put more money in, but that won't work for everyone, so I think expectations of retirements ages have to rise.
In general here has to be a combination of higher payments, later retirement and lower pensions.

But basically no, I don't think we are massively extending people useful working lives - we are extending the part when they are "doddery" and less able.