If investors were at all worried about that doomsday possibility - for either the US or Japan - it isn't being reflected in the markets. Furthermore, it has been obvious for over 100 years that the US intends to "monetize the debt" (if you mean not pay it back). The US hasn't actually paid back its debts since Andrew Jackson was president, it just pays the interest and attempts to grow the economy faster than it grows the debt...and that arrangement is OK.
Same goes for Japan. Japan has one of the highest debt-to-GDP rates in the world, yet it can borrow money for less than 1%. Investors are not at all concerned about the security of their investment.
that is correct. humans are herd animals. when Europe goes they will stampede to perceived safety, and those US/JPN interest rates will drop even
further. Then it will become obvious that Japan is a doomed ship as well, and they will stampede out of there. At that point, however, they will be beginning to see Sovereign Debt the same way everyone saw Mortgage Backed Securities in 2008/2009: as a bubble asset. If we do not have a
very plausible and
very reassuring plan in place to deal with our long term structural deficit by that point, they will dump the Treasury as soon as they are done fleeing the Japanese.
I think you're grossly overestimating the demographic problems the US faces, and grossly underestimating the role of technology, migration, and economics in solving those problems relatively smoothly.
The US Demographic problems are serious, but light compared to Europe and Japan. We just have a bulge - a kidney stone to pass. Japan is a dead nation walking, and they are also one of the most xenophobic nations on the planet. They have no intention of mass immigration, and they would have to deny those immigrants access to the welfare state if they did.
as Friedman pointed out: an open borders policy and a welfare state do not mix well.
I agree that a USE is certainly not politically possible right now. However, if the current financial crisis gets worse - or if Europe manages to muddle through only to get hit by another financial crisis in 10 years - who knows what will be politically possible? Stranger things have happened.
they aren't going to get 10 years. I doubt they get
two years.
In any case, I agree that Europe is in a worse economic situation. But this is mostly due to the mismatch between who sets fiscal policy and who sets monetary policy, rather than demographic patterns.
not at all - our problems in the US would not be solved if our States could print money, or if they ceased to exist and we all turned to the Federal Government for all our needs. In Greece, every 100 Grandparents have 42 Grandkids trying to provide for them. That's just not a sustainable model when you are taxing the young to pay for the old.
True, Europe would be better off with higher birth rates...but this problem is solvable if European nations are willing to allow more immigration and abandon the outdated idea that nations are defined by a shared ethnicity.
Europe long ago decided to let in immigration (which is currently sparking a backlash) The problem is that they aren't willing to deny those immigrants access to the welfare state.
but that would be cruel and racist and anglo-saxon jungle-like. And so instead immigrant populaces prove to be greater average drains upon the nations fisc than the native borns.
There are millions of well-educated people who want to immigrate to the United States, who are turned away every year. And there are hundreds of millions of uneducated but intelligent people who want to immigrate to the United States, who are turned away every year. I'm not saying we need to accept them all, but accepting a great deal more of highly-skilled or highly-intelligent people would be a good place to start. We could even pay for their educations like we do for our own children, in order to produce more qualified American workers and taxpayers.
You will get no argument from me that current US immigration policy is flawed. We should be seeking to drain the brains of everyone else; not the other way 'round.
Ultimately I think that the demographic problems in developed countries are highly exaggerated, in terms of their effect on the global economy (although they'll be bad for some individual nations if no steps are taken to reverse the trend). More people than ever are attaining a level of affluence at which they can help solve global problems, and this trend is unlikely to reverse IMO.
That is a nice statement that sounds good but means nothing. "Help solve global problems"? If you don't bother to show up for the future, you won't be there. A good chunk of Western Culture has decided not to show up for the future - and all those things we'd like to wish we could take for granted (individual liberty, equality of women, freedom of speech, representative government) will fade when the culture that supports them does. The problems of the world are about to get
worse.
