The insanity of statist planning in graphs

silverharp

Was going for a SLUSK style headline (no offense!):D

Can the western world ever come out of this crises. Assuming the immediate crises hits a bottom over the next 5 or 10 years, once the recovery begins all the major states will have debt to GDP of well over 100%. Next come all the demographic issues coming to a head at the very time that the "treasury" will be empty.

It seems reaonable to say that the model of being raised partially at the state's expense for 20 years working 35 years and then retiring for another 30 years at 2/3rds ones salary is a ponzi scheme. Good luck to anyone who benefits from it. But one would have to say to anyone in their 20's and 30's , you are unlikely to collect?



http://www.risk.net/credit/news/1600414/-drastic-measures-curb-public-debt-bis

Economists at the Bank for International Settlements have warned the fiscal problems facing industrial economies are more serious than official figures suggest, and that proposed measures for tackling public debt could prove insufficient.
In a report called The future of public debt: prospects and implications, the authors say important factors, such as the costs associated with ageing populations in industrialised countries, have been overlooked.


During the financial crisis, governments implemented stimulus programmes and took on large amounts of debt from failing institutions, which led to a dramatic increase in public debt ratios. OECD figures show that total public sector debt in industrialised countries is expected to exceed 100% of GDP in 2011, levels unprecedented in peacetime.
But according to the report, co-authored by Stephen Cecchetti, MS Mohanty and Fabrizio Zampolli, even these figures may conceal the true size of the problem.
“Rapidly ageing populations present a number of countries with the prospect of enormous future costs that are not wholly recognised in current budget projections. The size of these future liabilities is anyone’s guess. As far as we know, there is no definite and comprehensive account of the unfunded, contingent liabilities that governments currently have accumulated,” the report said.
Despite high levels of public debt, yields on government bonds for most developed countries – Greece being the obvious exception - have remained relatively low. But the report warns that this apparent investor confidence may be misleading. Failure to tackle unfunded liabilities may lead to a sudden spike in yields, endangering the economic recovery.
“Bond traders are notoriously short sighted, assuming they can get out before the storm hits: their time horizons are days and weeks, not months and decades. We take a longer and less benign view of current developments,” the authors wrote.
Age-related spending (pensions and health care costs) has increased in recent years as the ratio of old-age population to working-age population has risen, and the report estimates that unfunded liabilities resulting from age-related spending will lead to a rapid rise in debt levels over the next decade. The projections show that primary debt/GDP ratios will reach 200% in the UK and 150% in Belgium, France, Ireland, Greece, Italy and the US by 2020, and that even “draconian” measures to cut age related spending would fail to bring debt under control in France, Ireland, the UK and the US.
The authors advise raising the retirement age as a way of reducing unfunded liabilities. “An important aspect of measures to tackle future liabilities is that any potential adverse impact on today’s saving behaviour be minimised. From this point of view, a decision to raise the retirement age appears a better measure than a future cut in benefits or an increase in taxes.”


From the BIS report



or to give small idea of the pension/welfare issues facing mature economies.

http://pensionpulse.blogspot.com/2010/03/will-real-debt-crisis-please-stand-up.html

According to research by Jagadeesh Gokhale, an economist at the Cato Institute in Washington, bringing Greece’s pension obligations onto its balance sheet would show that the government’s debt is in reality equal to 875 percent of its gross domestic product, which is the broadest measure of a nation’s economic output. That would be the highest debt level among the 16 nations that use the euro, and far above Greece’s official debt level of 113 percent.
Other countries have obscured their total obligations as well. In France, where the official debt level is 76 percent of economic output, total debt rises to 549 percent once all of its current pension promises are taken into account. And in Germany, the current debt level of 69 percent would soar to 418 percent.