Something we stumbled across while working on a separate post:
“Under our first scenario, which assumes no policy actions to counter demographic fiscal pressures, a general downward slide in sovereign ratings is expected to start in 2020, accelerating through 2030 and thereafter. …
“In our view, it is inconceivable that governments will allow debt and deficit burdens to spiral out of control in the manner outlined above, even if creditors would be willing to underwrite such a huge amount of debt.”
– Standard & Poor’s report on global ageing, October 2010
Ahem:
From inconceivable to kindasortamaybe conceivable to USAAA Downgrade to eurozone Creditwatch negative in fourteen months.
Other than jeering at S&P, we suppose the larger point here is that even if Eurogeddon is avoided and the US economy continues its mild rebound, the demographic burdens that S&P was referring to will remain enormous challenges to the economies, fiscal policies and more generally the social fabric of the developed world for some time yet.
Again, even if an immediate crisis is averted, premature austerity in Europe and the US could well make the fiscal burden worse in the coming years by restricting growth. A combination of fertility ratios in secular decline and an aversion to liberalised immigration policies also means more of the old continuing to depend on fewer of the young.
Well, you know our advice.
Related link:
Kill the old, AAA edition – FT Alphaville