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spyguy

Its The Oaps That Have Messed It Up!

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Demographics, dear boy, demographics.

http://www.economist.com/blogs/buttonwood/2014/11/secular-stagnation#comments

(Hopefully you see the column).

Basically, charting real + nominal growth across UK, US, Jap, Ger, Fra + Ita.

Shows real GDP growth falling below 2%

Table then summarises OAPs as % of population.

The (relative) poor economic performance in the UK (and others) is pretty much down to the working age population shrinking.

Borrowing lots of money - for a house or whatever - when the economy is running headlong into slow growth is suicide.

The markets are going to switch on this, and start pushing up countries debt costs.

'The legacy is a high level of debts across the developed world. Some economists tend to dismiss the impact of debt, arguing that one person's liability is another person's asset; when M&G recently pointed out that global gross debt was approaching the $100 trillion mark, someone tweeted that net debt is still zero. One would have thought the last few years would have proved the folly of such a philosophy. First, if debt is secured against an asset, such as a property, then a fall in asset prices means that both creditor and debtor can lose; the debtor loses his or her deposit/equity (and sometimes their house) and the creditor takes a writedown on the loan. Secondly, debt needs to be refinanced on a constant basis. The higher the value of debt relative to GDP, the more debt needs to be refinanced each year; if creditors lose their willingness to roll over that debt, a financial crisis can ensue.'

Debt spiral it is then.

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********. The muslamic economies are all growing, despite the female half of the population being frozen out of the workforce. So its not the working age population that is pivotal.

Our relative poor performance is because of 1)bankster scum 2)public sector troughers

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********. The muslamic economies are all growing, despite the female half of the population being frozen out of the workforce. So its not the working age population that is pivotal.

Our relative poor performance is because of 1)bankster scum 2)public sector troughers

That's a good point, although most of those economies are very resource (oil) rich so that does change the game somewhat.

However, surely technological advancements and improvements in productivity should mean that a smaller working population could support the same economic output? Or better yet that we could all work a bit less and have a better work-life balance without any negative impact on the economy?

Instead the younger generations are having problems generating enough to support the older end of the current population, while themselves being essentially told to piss off if they think that they will ever be allowed to stop working and retire at all.

I think a large part of the problem is not just the bankers and the poorly managed public sector, but an economic model that chases perpetual growth above all else.

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From the two charts (GDP, % change on a year earlier - 10 year moving average) in the economist link it's interesting to see Britain's nominal growth chart currently being shown as one of the highest (of the six countries being considered).

Yet the real growth chart shows it currently 2nd lowest at nearly zero (Italy being the lowest).

Mind you it's difficult to believe the real growth chart for Britain when it shows real growth suddenly increasing after about year 2000 and being the highest of all six countries from about year 2000 to 2007 (before Britain's real growth chart then declines more rapidly). Even the relative increase shown after about 1980 seems a bit doubtful. Seeing as Britain's manufacturing contribution continued its decline most if not all of that time.

It would have been interesting to see the GDP, % change on a year earlier per Capita charts (10 year moving average) for each country as well.

Edited by billybong

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How much of the UK's GDP is housing-related?

Don't forget prostitution and drug dealing!

Just got to figure out how much, burglary, mugging and fraud add to the economy and we'll soon overtake China! ;)

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The new home building chart below seems to follow the trends of the economists real growth chart (10 year moving average) to some extent from 1980 onwards and the massive house price increases would likely lever up the effect - so maybe there's some contribution from new home building although whether new home building is truly "real" growth is debatable. During the 1980s they used to continually claim that the excessive investment in rising house prices detracted from the growth in the economy.

Of course then there's renovation of existing houses, white goods and furniture etc etc as well.

Before 1980 the number of new homes being built was massively higher than after 1980 (going back to the 1950s - not long after the end of World War 2) so doesn't tie in with the low real growth figures as shown in the economists chart during the period before 1980.

See chart below:

1404_housebuilding_464.gif

Edited by billybong

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Another thing is that the nominal growth chart (10 year moving average) in the economists article has continued to decline since the 2010 general election even though the debt has more or less doubled since then.

How much extra debt will it take to get the declining nominal GDP growth to start to increase - never mind the real GDP growth.

The real growth 10 year moving average has been declining since about 2002 - so the moving average probably started to decline about 1997 when NuLabour came into power. The rate of decline didn't slow down with the Conservatives (plus LibDem).

It seems to confirm that they've really put the UK into a bit of a dead end on the economy.

Edited by billybong

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Borrowing lots of money - for a house or whatever - when the economy is running headlong into slow growth is suicide.

The markets are going to switch on this, and start pushing up countries debt costs.

You mean like Japan and Deutscheland?

Oh noes! We;re all going to die!

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You mean like Japan and Deutscheland?

Oh noes! We;re all going to die!

True

Oldies also invest conservatively pushing down interest rates

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You mean like Japan and Deutscheland?

Oh noes! We;re all going to die!

Japan is a wierd outlier. Loads of debt, most held by residents. Massive capital export.

People think Japan has done really badly over the last 20 years. Its not really when you take into account shrinking population.

Germany just does not do debt. Pensions and the like are much better funded.

The UK now has a shrinking workforce. We've tried to boost it by importing loads of immigrants - just like how they tried to save the textiles by import loads of un-educated Pakistani hillbillies.

The UK runs a large current account deficit.

The UK has barely funded its public sector pensions, despite massively increase the size of the public sector (thanks gordon).

The UK looks more + more like an over leveraged private equity company.

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Japan is a wierd outlier. Loads of debt, most held by residents. Massive capital export.

People think Japan has done really badly over the last 20 years. Its not really when you take into account shrinking population.

Germany just does not do debt. Pensions and the like are much better funded.

The UK now has a shrinking workforce. We've tried to boost it by importing loads of immigrants - just like how they tried to save the textiles by import loads of un-educated Pakistani hillbillies.

The UK runs a large current account deficit.

The UK has barely funded its public sector pensions, despite massively increase the size of the public sector (thanks gordon).

The UK looks more + more like an over leveraged private equity company.

and what are UK nominal & real interest rates?

The market has noticed and they're on the floor. (Why wouldn't the 'market' 'notice'?!)

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Japan is a wierd outlier. Loads of debt, most held by residents. Massive capital export.

People think Japan has done really badly over the last 20 years. Its not really when you take into account shrinking population.

Germany just does not do debt. Pensions and the like are much better funded.

The UK now has a shrinking workforce. We've tried to boost it by importing loads of immigrants - just like how they tried to save the textiles by import loads of un-educated Pakistani hillbillies.

The UK runs a large current account deficit.

The UK has barely funded its public sector pensions, despite massively increase the size of the public sector (thanks gordon).

The UK looks more + more like an over leveraged private equity company.

We have a lot of debt in the public sector......I guess it's basically a debt to the UK populace but an asset to the lucky few with gold plated benefits or indeed the boomers invested in gilts.. Same with the state pension and health liabilities...a massive asset to the retired and a massive liability to the workers.

Don't think we should over exaggerate net private sector debt...we have a surplus balance sheet with the rest of the world invested by the City or in foreign property. A perilous highly leveraged balance sheet though.

Edited by crashmonitor

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The new home building chart below seems to follow the trends of the economists real growth chart (10 year moving average) to some extent from 1980 onwards and the massive house price increases would likely lever up the effect - so maybe there's some contribution from new home building although whether new home building is truly "real" growth is debatable. During the 1980s they used to continually claim that the excessive investment in rising house prices detracted from the growth in the economy.

Of course then there's renovation of existing houses, white goods and furniture etc etc as well.

Before 1980 the number of new homes being built was massively higher than after 1980 (going back to the 1950s - not long after the end of World War 2) so doesn't tie in with the low real growth figures as shown in the economists chart during the period before 1980.

See chart below:

1404_housebuilding_464.gif

Interesting that some of the biggest declines in the building rate of council houses happened when Labour were in power - 1967 and 1977.

But then this was when local councils controlled housing, and they could well have different leadership to westminster.

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and what are UK nominal & real interest rates?

The market has noticed and they're on the floor. (Why wouldn't the 'market' 'notice'?!)

No. The BoE is acting as the market. The Boe is suppressing the price signal - bit like feeling OK when you are pumped full of morphine. Unfortunately is not doing anything about the need for morphine - just crossing fingers + hoping for the best.

The active market does not care at the moment - its mainly influenced by the Fed.

When the Fed stops buying, the market will stop buying.

Its a bit like Greek's bonds - the market was right until it was wrong.

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Interesting that some of the biggest declines in the building rate of council houses happened when Labour were in power - 1967 and 1977.

Dunno about 1967. But 1977 was when we were bust. Not so much as in Britain today, more as in Greece today.

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Ripe for an http://

en.wikipedia.org/wiki/Initial_public_offering ;)

An IPO accords several benefits to the previously private company:

  • Enlarging and diversifying equity base
  • Enabling cheaper access to capital
  • Increasing exposure, prestige, and public image
  • Attracting and retaining better management and employees through liquid equity participation
  • Facilitating acquisitions (potentially in return for shares of stock)
  • Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.
Disadvantages

There are several disadvantages to completing an initial public offering:

  • Significant legal, accounting and marketing costs, many of which are ongoing
  • Requirement to disclose financial and business information
  • Meaningful time, effort and attention required of senior management
  • Risk that required funding will not be raised
  • Public dissemination of information which may be useful to competitors, suppliers and customers.
  • Loss of control and stronger agency problems due to new shareholders

From the Benefits list maybe there'll be a silver lining for the UK.

From the Disadvantages list they'll have to spend some time doing things other than filling in their expenses forms, flipping properties and shredding stuff.

Maybe that should be in the Benefits list.

Edited by billybong

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Bit like the sealed compartments/bulkheads of a ship.....us pumps one side with water then slows down, so japan fills the other end to counterbalance ...we are somewhere in the middle......money/water flushed into the system to keep afloat......only way out is to rapidly convert into a submarine or sink with the weight of it all. ;)

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Japan is a wierd outlier. Loads of debt, most held by residents. Massive capital export.

People think Japan has done really badly over the last 20 years. Its not really when you take into account shrinking population.

Germany just does not do debt. Pensions and the like are much better funded.

The UK now has a shrinking workforce. We've tried to boost it by importing loads of immigrants - just like how they tried to save the textiles by import loads of un-educated Pakistani hillbillies.

The UK runs a large current account deficit.

The UK has barely funded its public sector pensions, despite massively increase the size of the public sector (thanks gordon).

The UK looks more + more like an over leveraged private equity company.

Indeed. In per capita terms, Japan had no 'lost decade'...their GDP kept up with both the US and EU...Both the EU and US grew GDP by simply bloating their population (mexicans in the case of the US, opening up the eastern bloc in the EU).

The UK's zero hour will come when we no longer have any infrastructure to sell off to the highest bidding foreigner...or else we just wont be desirable anymore.

Now, the chinese wont stand for this. That is why the UKs immigration path is already set over the next quarter century or so. Forget a couple million pakistanis or Poles...mark my words, by 2025 there will be AT LEAST 20 million chinese immigrants in the UK. It is the chinese governments intention to ensure the chinese population forms a democratic majority in the UK, so 40 million chinese in the UK will be the desired number by mid-century.

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