The World Economy +10 Years

[imoldernu]

Hoping to begin a wider discussion to look at some of the factors that are involved in the overall construct of the world's economy and financial system that work together to provide the basis of our own national and personal future.
In short... we are not alone, and what happens in the rest of the world can and does affect where we will be in retirement.

To start off... let's stick to the subject of the relative population size of the countries that directly or indirectly affects our own economy.
I confess that until I looked, I had no idea. When I found out, I was amazed at my ignorance.

Here's the challenge... First... no cheating by looking up the answers . IMO... if you can guess the population within 50% of the actual, you're doing good... ie... if you guess 100 million... and the answer is either 50 million or 150 million... you're doing good.
Head start... U.S. population = 329 million

Australia
Brazil
Russia
Germany
Japan
Canada
China
Sweden
Indonesia
Mexico
Argentina
Saudi Arabia

You can find the answers here:

https://www.usdebtclock.org/world-debt-clock.html

You don't have to say how well you did... but maybe a head start on learning how the world works, and how our own future may be influenced by the international community, as the world grows smaller.

This is just a start.... Many, many more parts that will be part of what the world will look like in 10 years. Look at the size of the countries, their individual economies, (GDP)... national debt, individual net worth and personal debt, and the living conditions. Where are we headed?

So... let's start off with just populations.

 

[ERD50]

Interesting test. I figured I'd do poorly, and since +/- 50% gives a lot of latitude, I'll qualify my 6 out of 12 as poor.

My worst - semi-spoiler alert, my misses would be a hint, so select the WHITE text below to highlight it so you can read it if you want:

WHITE TEXT BELOW
Australia - I was way high (5x) - hey, it's as big (bigger?) than the US, so I thought the population should be some fair fraction of the US

Canada - I was a little high

Sweden - I was pretty high

Indonesia - I was WAY low~ 4x (hey, it's small on a map, isn't it?!)

Argentina and Saudi Arabia - I was high ~ 2x.



WHITE TEXT ABOVE

-ERD50

 

[pacergal]

Interesting.
5/12, I had populations way higher than they actually are reported. I think I need to pay more attention!

 

[timo2]

I have no chance at that. But your post popped another idea in my head: According to megacity theory, countries won't matter, just the huge mega-cities. https://qz.com/666153/megacities-no...ocial-structures-adapted-from-connectography/

"Cities are mankind’s most enduring and stable mode of social organization, outlasting all empires and nations over which they have presided. Today cities have become the world’s dominant demographic and economic clusters.

As the sociologist Christopher Chase-Dunn has pointed out, it is not population or territorial size that drives world-city status, but economic weight, proximity to zones of growth, political stability, and attractiveness for foreign capital. In other words, connectivity matters more than size. Cities thus deserve more nuanced treatment on our maps than simply as homogeneous black dots."

 

[Navigator]

I think even more telling is the population growth rate of these countries: https://www.indexmundi.com/g/r.aspx?v=24 . Three of the countries have a negative growth rate and only three are above 1%. With such low growth rates, indicative of an aging world population, I wonder if there will be enough economic growth to fund my retirement.

 

[6miths]

I did very well but it is an area of interest. 12/12 and only one I was close to missing was Sweden which punches way above its weight. You should have included India, Pakistan, Bangladesh and Nigeria to make it more interesting.

 

[DrRoy]

8/12

 

[marko]

I have no chance at that. But your post popped another idea in my head: According to megacity theory, countries won't matter, just the huge mega-cities. https://qz.com/666153/megacities-no...ocial-structures-adapted-from-connectography/

Cities thus deserve more nuanced treatment on our maps than simply as homogeneous black dots."

Good point.

In William Gibson's futuristic Neuromancer trilogy, he describes "The Sprawl"; sort of one huge, continuous city from Boston to Atlanta "the Boston-Atlanta Metropolitan Axis" (BAMA). Rather than distinct towns with their own cultural profile, it's all one big gigantic city.

 

[marko]

Am I reading the chart correctly that Canada has a higher public debt and external debt to GDP ratio than the US?

 

[Totoro]

I missed Saudi Arabia and Canada, both too low. In terms of future, here's another challenge:
* Estimate total population of North America, South America, Africa, Europe (West+East) and Asia
* Do it again for expected population 30 years out (middle scenario)

Cheat-sheet:
https://en.wikipedia.org/wiki/World_population#/media/File:World_population_(UN).svg

 

[Totoro]

Am I reading the chart correctly that Canada has a higher public debt and external debt to GDP ratio than the US?

Wonder what their source is.
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Lists Canada as lower, and USA as higher.

 

[imoldernu]

Thank you for the responses, and the very interesting links.
When I started, I didn't realize just how complicated the subject would really be.

It started off with the personal debt as part of the national debt. My taxpayer share of the national debt is $187K, while it looks like the amount the government is getting paid back is $28K.

That's just for starters. What does that mean?... Do the countries that hold U.S.Debt know that, or is it just because we've always been trusted?

And how about the percent of GDP we owe to others. Looks like we owe 87% externally... Hmmm. .. What does it mean that China only owes 12%?

If that wasn't enough, the links you provided have opened more questions than they answered. (working with the Wikipedia link that can be sorted, was absolutely fascinating).

Looking ahead 10 years? Looking at the Stock Market?... So, long term, the price of Tesla? Or... what happens when the African countries grow at compound percentage rates in the next ten years?

I'm sure that economists can piece this together, and look long term. Somewhere in this mix of statistics there has to be something more than overlaying charts to predict the future. While the pundits generally agree there will be some level of recession in the near future, what place in the world economy will the U.S. have. Will the economy mirror older recessions, with regard to recovery time, and major effects such as unemployment.
https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

In short... what will happen in the next ten years, and how will it affect retirement? I am thinking in terms of my sons and their families.

 

[6miths]

I don't think anyone knows, even the most informed. Chaos theory is very much in play and this is definitely an incredibly complex system. Barring some truly disruptive development - either positive or negative (and remember that even 'positive' developments can have many negative local effects). I suspect that things will continue to deteriorate for what used to be 'the middle class' in America and the West. At the global level, I don't think that demographics and population growth differentials bode well for the same group - ironically these trends have been significantly influenced by this same group. Apologies as I think it is difficult [impossible] to separate economics from politics.

 

[YVRRocketSurgery]

Wonder what their source is.
https://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Lists Canada as lower, and USA as higher.

One thing I've also had a challenge wrapping my head around is understanding the methodology and details around the calculations so that it's an apples to apples comparison.
For example, I'm assuming total public debt includes both federal and provincial debt. But government debt typically includes self supported commercial debt owned by crown corporations which isn't tax-payer supported debt.

 

[LRDave]

8/12, but I knew China, India, Canada & Mexico, so I only got 50% of the remaining 8....

 

[ERD50]

... Looking ahead 10 years? Looking at the Stock Market?... So, long term, the price of Tesla? Or... what happens when the African countries grow at compound percentage rates in the next ten years?

I'm sure that economists can piece this together, and look long term. ....

In short... what will happen in the next ten years, and how will it affect retirement? I am thinking in terms of my sons and their families.

I don't think anyone knows, even the most informed. Chaos theory is very much in play and this is definitely an incredibly complex system. ...

Agree with 6smiths, no one knows. If we knew the stock market level, or Tesla 10 years out, they would trade at that price minus the 10 year Treasury rate.

Economists aren't market predictors, they may understand the interactions pretty well, but they can't predict the future. One Nobel Laureate tried a few years ago and failed miserably.

Ans while it isn't a zero-sum game, I do think the rising economies and motivation/demand for a higher standard of living in the 2nd/3rd world countries will put pressure on the US economy, as it has for the past 40~50 years. But what can we do? Try to adapt the best we can, and be happy for the poorest of the poor who are rising out of desperate poverty.

I think life will still be very, very good in 10 years in the US. I'm not too worried for my kids. I do see one possible, maybe even likely threat to that, but I won't go there, to avoid a hot-button issue.

-ERD50

 

[imoldernu]

FWIW.... I wouldn't pretend to understand what goes into the economy as a predictor of the future, and don't think we'll figure it out here, but the comments and deeper thinking is very enlightening.

After spending some time reading that Wiki article about recessions, there seems to be a recurring pattern... not in all, but enough to see some early warnings, as well as a similar recovery process. https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

At the same time, looking at predictions based on numbers without a cause/effect analysis, but just historical market movements, makes a different argument. Here's a "today" analysis that many follow and believe in.

https://www.zerohedge.com/news/2019-07-14/markets-its-back-most-important-question-2019

Am still going over the "world debt clocks" , using the historical data that goes back to 1980, and forward to 2023, looking at the change in U.S Debt.

Approx US Debt:
1980 1T
1990 3T
2008 10T
2019 22T
2023 30T
Real Inflation from 1980 to 2019 is about 300%
Debt is 2200% if I figured it correctly.

No intention to "solve" where the economy is going... but as most of you have said in one way or another... it's complex, and as we go forward, some numbers that we can be aware of. Not just a simple chart.

I would be interested in any thoughts about what we might look for as the world grows smaller. What of the huge changes in third world countries, and the unsettlement in many autocracies?

I feel we can discuss this without becoming political. All sources are welcome.

 

[ejman]

I think one of the primary drivers for future growth (or lack thereof) is that population growth rates are dramatically decreasing all over the world with some exceptions (particularly Muslim countries from what I read). Although I don't have a link, I remember reading that Mexico's population increase boom is over and it now resembles the US population growth rate which is minimal if immigration is taken out of the picture.

 

[marko]

FWIW, the interest paid on those global debts are going somewhere. Indirectly, people are getting paid, spending and living through that income. Maybe some of us here hold a tiny sliver of that debt through either our bank or bond holdings?

I'd suspect that the major recipients of those payments have a motivation in keeping those payments coming in from both a default and investment perspective.

Imagine if all those interest payments suddenly stopped! Lots of good reasons to keep digging the hole.

 

[free2020]

I think one of the primary drivers for future growth (or lack thereof) is that population growth rates are dramatically decreasing all over the world with some exceptions (particularly Muslim countries from what I read). Although I don't have a link, I remember reading that Mexico's population increase boom is over and it now resembles the US population growth rate which is minimal if immigration is taken out of the picture.

Dr Hans Rosling (late) has spoken about this in his quest to educate the world on how to be more fact based. One of them is that peak child is behind us. All over the globe. By 2050 it will become obvious to all. We tend to not change the narrative in our heads because we don’t dig for data and also there are several instincts/ biases that humans are inherently given to.

Listen to Dr Rosling on Ted or read his seminal book “Factfulness”

 

[imoldernu]

Dr Hans Rosling (late) has spoken about this in his quest to educate the world on how to be more fact based. One of them is that peak child is behind us. All over the globe. By 2050 it will become obvious to all. We tend to not change the narrative in our heads because we don’t dig for data and also there are several instincts/ biases that humans are inherently given to.

Listen to Dr Rosling on Ted or read his seminal book “Factfulness”

Yes... I was fortunate to tune in to this TV show about China. Am hoping that somewhere, the entire show will be repeated. I do believe I watched it with my jaw wide open... seeing 150 MPH trains connecting vast areas and technology that is no longer just stolen, but created... and the extremely high living standards of the advanced cities... Absolutely awesome.

This was the preview to an hour show:

The article here:
https://www.nbcnews.com/tech/tech-news/china-s-rising-tech-scene-threatens-u-s-brain-drain-n1029256

Don't know about you, but I've got a lot of catching up to do on this world.

 

[AnonEMouse]

World population is around 7 billion now and projected to level off around 10b as birth rates are dropping. This of course implies the world has to be aging as well:

"The world's older population continues to grow at an unprecedented rate. Today, 8.5 percent of people worldwide (617 million) are aged 65 and over. According to a new report, “An Aging World: 2015 ,” this percentage is projected to jump to nearly 17 percent of the world's population by 2050 (1.6 billion)."

This would severely stress the current economic model if everyone retired at the same age and rate of the past. But there are signs this isn't happening and the system is adapting. Countries are raising the minimum age for state pensions (e.g., SS in the US). Russia recently raised the age to much protest and Brazil is doing likewise. More people of retirement age are working now than ever. That should relieve some pressure on the economy, though obviously not all.

So in the short-term there shouldn't be much adaptation required. Those already retired will likely live out their years without too much worry.

Those on the "young dreamers" forum, however, would face a much more difficult path. They must content with stagnant wages, lower expected future returns, phasing out of pensions, lowering of state pensions (either thru raising minimum age or outright benefit cuts), all while paying out more taxes to fund current retirees and pay for past government expenditures.

The social ramifications are already evident. There are more and more dual income households (hard to survive on one income alone). People are delaying marriage and kids or foregoing them altogether (thus the declining birthrate).

In order to be financial independent, they would have to accumulate a bigger fund but with lower pay. This means this board's membership would likely decline over the years as fewer people would be able to attain/aspire to FI/RE.

 

[imoldernu]

The social ramifications are already evident. There are more and more dual income households (hard to survive on one income alone). People are delaying marriage and kids or foregoing them altogether (thus the declining birthrate).

In order to be financial independent, they would have to accumulate a bigger fund but with lower pay. This means this board's membership would likely decline over the years as fewer people would be able to attain/aspire to FI/RE.

Nice post..Well done!

 

[TheRunningMan]

I think even more telling is the population growth rate of these countries: https://www.indexmundi.com/g/r.aspx?v=24 . Three of the countries have a negative growth rate and only three are above 1%. With such low growth rates, indicative of an aging world population, I wonder if there will be enough economic growth to fund my retirement.

Yep, we should push all of our portfolios into Africa...micro-finance perhaps

 

[Running_Man]

The world is on a financial addiction of growing markets and investing in baskets as the baskets get bigger. As population growth slows or goes to zero the financial system no longer works, the strains are already evident, look at the past 200 years and find negative interest rates anywhere, they are a tax on savers and becoming the primary means of funding international currency and government relations. This will act as a force putting more people into the workforce and out of retirement. In the beginning this forces equity and bond capital prices higher but eventually negative interest rates will work as a tax for anyone saving money and put them back to work.