"We are all Greeks" - so begins one of the best reports on the unsustainability of the status quo, and on what "the new world order" will look like, created by SocGen's Veronique Riches-Flores. Her overarching observation: "No one can claim immunity from a Greek-style spiral" because "Our economies are mature, with weak potential GDP, especially post the financial crisis" and due to that old standby which everyone chooses so conveniently to forget, yet which is the biggest threat to the world's "welfare-state" stability, in existence since 1860 [is she referring to the US Civil War?.....CV] and which has been responsible for not only the longest period of peace in world history, but for the longest stealth plundering of middle-class wealth (there is indeed no such thing as a free lunch): "We are aging - we have no chance to see our future income improving substantially in the long run ; our savings capacities are shrinking and our health and pensions spending is increasing."
That, in a nutshell, is it, no matter how many protracted essays one reads predicting the future (or war in Europe): the truth is there is increasingly less cash flow, coupled with increasingly more demands for cash.
Unlike before, where growth could be masked by incremental new debt in either the public or private sector (that strawman which for decades allowed Keynesianism and its modern versions to flourish despite its fatal flaws), this time around, there is no more debt capacity dry powder. In SocGen's words - 1) at 100% of OECD's GDP, even if the primary deficit disappeared as of today, it would still require three years to stabilize the debt ratio, and 2) the fiscal consolidation required - returning to 60% of GDP - would take a minimum of 10 years according to the OECD, 20 years according to the IMF. Here is where the report gets a slightly political twist, one which those GOPers capable of simple math, could easily use in their debates with democrats over the proper way of achieving fiscal stability: "of the 107 episodes of fiscal adjustments observed in the past 40 years the most efficient in terms of fiscal results and least costly in terms of growth have been the ones based on spending drag rather than tax increases."
And therein lies the rub: with the average age of the global developed world population older now than it has ever been in the history of the welfare state experiment, the last thing a politically unstable world can afford is to spring upon the population that there is simply "no moah money." Or at least not in a world which does not want to experience the aftermath of hundreds of millions of formerly 'entitled' people suddenly realizing they have been lied to for decades and all those golden years have suffered the fate of aaand it's gone.
It gets worse: Finish reading from original article
