Sunday, March 17, 2013

Borrowing ‘Riches’ no More

With the Economic Recession bringing about Unprecedented levels of Public Debt, The Industrialized Nations on Earth are facing their Worst ever fears of Insolvency and High Levels of Inflation if Current Profligate Fiscal and Monetary Policies Continue Unabated

Riches running on debt

It was for the first time ever since World War II that the public debt of the industrialized nations actually crossed the primary balance figure as percentage of GDP showing the biggest signs of crumbling for the global financial system triggered by the subprime mortgage crisis. In fact, overall fiscal balances (net of government financial rescue programmes) have been deteriorating sharply since the crisis began, rising by 20 to 30 percentage points of GDP in just 3 years. But the biggest problem this time is that employment and growth are unlikely to return to pre-crisis levels in the foreseeable future partly due to large scale outsourcing. Thus, unemployment and other benefits would be paid for several years and high levels of public investment will have to be maintained.

It’s costly getting old

With the European economies ageing fast led by big EU economies countries like Germany, Italy and Spain coupled with their cradle to grave kind social welfare systems, EU is in for a long rough ride with a further swelling of its healthcare and pension budgets in the future. greece has already capitulated while many others are almost insolvent. On the other hand, USA, the world’s most populous nation with a near universal healthcare system, is already bleeding with a colossal budget deficit resulting in sky high debt levels. It is projected that in order to meet its age-related spending liabilities the United States would need a permanent improvement in its budget balances of the order of 2.6% of 2009 GDP in the next 50 years and 3.2% in 75 years.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Posted by at
Labels: , , , , , , , , , , , , ,