Keys Corner » Economics

National debt per citizen

John — Sun, 25 Sep 2011 07:10:39 +0000

I had been asking myself how on earth the Greeks could have amassed debt of €30 million per citizen until last night talking to someone in German (and using “Milliarden” the German for US-billions) I realized I had been working in British billions instead of American billions.

The actual debt per citizen is just under 30 000 Euro per person. How does that compare to other countries? Here’s a table I put together based on the figures I found at nationaldebtclocks

Country	National Debt (1 billion = 10 to power of 9)	Debt per Citizen (in Euro, '.' as thousands separator)
Australia	AUD 147 billion	4.766
Sweden	SEK 1173 billion	13.539
Spain	EUR 631 billion	13.727
Portugal	EUR 147 billion	13.908
UK	GBP 1077 billion	19.825
Netherlands	EUR 364 billion	22.007
Germany	EUR 1899 billion	23.226
Ireland	EUR 107 billion	24.064
New Zealand	NZD 189 billion	25.006
France	EUR 1677 billion	25.924
Greece	EUR 336 billion	29.758
Italy	EUR 1894 billion	31.404
USA	USD 15142 billion	36.118
Japan	YEN 948741 billion	72.372

Debt in Euro per citizen (25th September 2011, Source: http://nationaldebtclocks.com/)
Note that these figures only give a partial picture of the debts in each country, as this article in yesterday’s Handelsblatt mentions (translation via Google Translate here).

Incompetent

John — Mon, 29 Aug 2011 19:00:00 +0000

The Daily Telegraph, yesterday:

Euro bail-out in doubt as ‘hysteria’ sweeps Germany
German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe’s revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga.

Merkel is – in my eyes – the most incompetent and dangerous Chancellor that Germany has suffered since the founding of the federal republic. The only good thing about this mess that she has drifted into would be if the government fell and new elections were called. Germany needs some leadership, and not someone managing by consensus based on Bildzeitung polls.

Update (2011-09-04): This article (in German) is why Merkel worries me so much. And here an article in English.

“These minis are ridiculous…”

John — Tue, 29 Jun 2010 14:02:02 +0000

Ronald Sherman, the president of the Metropolitan Taxicab Board of Trade, which represents 28 large fleet owners, said he had seen would-be taxi passengers ignore Chevrolet Malibu or Ford Escape cabs, opting for a longer wait in order to grab the more spacious Crown Vic.

“These minis are ridiculous; passengers do not get into them,” Mr. Sherman said, asserting that the smaller back seat and low headroom made the hybrids uncomfortable and potentially dangerous for riders.

Kevin Healy, another fleet owner, agreed. Of the Volkswagen Jetta, another alternative taxi, he said: “Literally, I can’t get in. And I would need a doctor to get out.”

Here’s the full article from the New York Times. Click on the links in the quote above to see what qualifies as a mini car in the eyes of the New York Metropolitan Taxicab Board of Trade. No wonder the USA is hungry for gasoline…

Running out of…

John — Wed, 10 Feb 2010 21:31:48 +0000

If global warming hasn’t frightened your socks off yet, then take a look at these two news items:

1. The UK is likely to run out of soil in the next 60 years. Other countries are similarly affected:

An estimated 75 billion tonnes of soil is lost annually with more than 80 per cent of the world’s farming land “moderately or severely eroded”…

2. The world production of phosphorous probably peaked in the late 1980′s (phosphorous is used to make fertiliser):

According to a study by Patrick Dery peak phosphorus occurred in the US in 1988 and the rest of the world in 1989. Others think we’re still 30 years away from the peak, but it doesn’t matter who’s right. Either way, unless we change what we’re doing now, we will have depleted our supply of the central building block of life within a few hundred years of discovering it, and we do not know how to make more.

Both articles are interesting reading and are quite short. Better not to think about oil or water either.

Mervyn King: Sudoku for Economists

John — Thu, 21 Jan 2010 21:34:24 +0000

Mervyn King, the Governor of the Bank of England, gave a speech at the University of Exeter this week. He uses an example of “Sudoku for Economists” (pdf file, 47 kB) to illustrate why the mess the world economy is in is unlikely to get any better. He produces a small 9-celled “sudoku table”, to illustrate that the high-saving countries (e.g. China, Japan) and the low-saving countries (USA, UK, Spain) are dependent on the choices the other group of countries make:

Sudoku for economists shows that countries cannot pursue for long incompatible economic policy frameworks.

The reason why continuing large deficits are not sustainable indefinitely is that for every current account deficit there is an equal net capital flow in the opposite direction. Even if those flows remain constant in size, they imply an ever increasing stock of international asset and liability positions. Today China alone has reserves of over two trillion dollars, and Japan another trillion dollars…

The problem being, as Keynes said at the Bretton Woods Conference in 1944:

The process of adjustment is compulsory for the debtor and voluntary for the creditor. If the creditor does not choose to make, or allow, his share of the adjustment, he suffers no inconvenience. For whilst a country’s reserve cannot fall below zero, there is no ceiling which sets an upper limit.

King proposes that the G20 countries, who between them produce 90% of the global GDP, should work closely together to coordinate the reduction of global trade imbalances.

However, looking at the level of trust and support the member states in the EU are currently prepared to give each other, I think that is a non-starter. You have Portugal, Ireland, Italy Greece and Spain (the PIIGS), who need to reduce government debt on the one hand and the comparatively strong economies, in particular Germany, on the other. The citizens of the PIIGS are likely to erupt in civil unrest as the pain of even partially addressing their need to reduce government spending is felt (there has already been unrest in Greece), and the German finance minister has reacted strongly against suggestions that Germany should help these countries. Germany is in a better position, but that is only a relative position. Germany also needs to balance its books and the government sees looming difficulties maintaining the standard of living that its citizens expect. Politicians’ main goal is to get re-elected every 4-5 years, so they have no motivation to upset their voters with tough government saving or giving financial help to other nations.

If close neighbours can’t pull together, the chance that the USA, China, Britain, India, Germany, Turkey and Japan (to name some of the G20 members) will agree to pull together to correct economic imbalance seems remote.

We have just seen how little common ground could be found to deal with the potentially catastrophic changes looming as a result of climate change.

The speech is quite short, worth reading, and contains some thought-provoking comments. But I don’t feel optimistic that his suggestion will be followed. Unfortunately he rates other alternatives that have already been mooted as even less likely to succeed. Not encouraging.

Very well paid

John — Mon, 18 Jan 2010 17:32:58 +0000

I noticed an article in the Daily Mail today about what Spanish air traffic controllers earn (here). I thought that must be typical exaggeration by the popular press, but decided to see if I find out what they “really” earn. It turns out that the figures are probably accurate – here’s an article in El Mundo quoting similar figures (translation here):

There are 2300 Spanish air traffic controllers. 28 of them earn more than 700,000 Euro per year, 135 earn more than 600,000 Euro and 713 have wages that range between 360,000 and 540,000 Euro. A few make more than 900,000 Euro. According to AENA, the average is 350,000 Euro per year, almost triple the amount that a British controller and twice that of a Frenchman, German or Italian.

I thought working in IT (information technology) was pretty reasonably paid, but there are very few employees in IT earning over 350,000 Euro a year. I would say there are not many salaried IT employees in Germany earning a third of that.

(By the way I am using the European separators for thousand (“,”). It is always a problem knowing which to use, the comma comes automatically to me after 30 years in Germany, and it is also what you see in Google’s automated translation above).

Successful German Discounters

John — Sat, 12 Dec 2009 08:03:21 +0000

Wal-Mart gave up trying to compete in Germany in 2006, unable to compete effectively against Aldi and Lidl.

Nonetheless, I was surprised to read in the latest Harvard Business Review (link to a summary of the article), that six German “hard discounters” (their term for discounters like Aldi and Lidl) are in the top ten global players. Between them, these six make $178,6 billion annual revenue out of the $220,2 billion that the top ten make between them. That is pretty impressive.

Part of the reason that Wal-Mart failed in Germany is that although Wal-Mart is seen in the USA as a discounter, it follows a completely different strategy to the German hard discounters. Wal-Mart’s stores are much larger, and they carry a huge range of stock compared to the German hard discounters.

Wal-Mart stocks up to 100 000 SKUs (stock keeping units); a hard discounter stocks around 1000 – 1500 SKUs. Of these over 90% are own-brand goods (Aldi), compared to under 40% at Wal-Mart. This allows them to run a much more efficient distribution chain than the larger discounters in the States, and gives them a massive price advantage. The HBR cites an comparison in made in Australia – a 60m roll of Aldi plastic wrap sells for A$1.29 compared to A$3.71 for a brand-name roll.

In case you think hard discounters are successful because of the current economic crisis, that is probably not the case – Aldi is Germany’s third most respected brand, behind Siemens and BMW. Their products often get the best rating in consumer test reports in Germany, beating the well known brand names. The quality is good enough that in the USA Aldi offers a “double guarantee” – if you are not satisfied, they replace the product and refund your money. As a result of offering good quality and low prices 43% of Germans in the lowest income group shop at Aldi – not surprising, but what is surprising is that 34% of those in the highest income group also shop there.

Here’s an overview of those ten global hard discounters summarised from the HBR article (Of the ten, I would hesitate to call Carrefour a pure “hard discounter”. Although they run some hard discount stores, they also run a large number of hypermarkets, each having a floor area and number of SKUs similar to Wal-Mart’s stores) :

Hard Discounter	HQ	Global Revenue 2008 (US$ billion)
Aldi	Germany	73.5
Schwarz Group (Lidl)	Germany	62.3
Carrefour	France	16.0
Rewe Group	Germany	15.9
Tengelmann	Germany	14.0
Dollar General	USA	11.0
Edeka	Germany	8.4
Family Dollar	USA	7.3
Dansk Supermarked	Denmark	7.3
Norma	Germany	4.5

Do as I say, not as I do!

John — Tue, 08 Dec 2009 19:51:16 +0000

Given the effort the music industry puts into chasing file downloaders for lost revenue, you would think that they would be punctilious about setting a good example to their customers. Unfortunately, that is not the case. The Canadian Recording Industry Association is currently being sued for not paying copyright on some 300 000 songs, which is expected to represent to total short-payment of around $6 billion.

It appears that the music industry believes that devoting effort to making these payments would be “an unproductive use of their time”:

David Basskin, the President and CEO of the Canadian Musical Reproduction Rights Agency Ltd., notes in his affidavit that “the record labels have devoted insufficient resources to identifying and paying the owners of musical works on the Pending Lists.” Basskin adds that some labels believe addressing the issue would be “an unproductive use of their time.”

I must admit that I find their logic impeccable – why invest your money keeping track of who you owe it to, if you can avoid paying them?

I imagine internet music file-sharers might feel that paying for downloads or going to the shops is equally an unproductive use of their time.

Suicidal Music Industry

John — Sat, 19 Sep 2009 04:22:33 +0000

There’s an article in ars technica about “big content”:

Songwriters, composers, and music publishers are lobbying Congress to legislate the payment of performance fees into downloaded music. If music publishers get their way, they’ll be able to extract additional licensing fees from music downloads, movies, and TV shows containing their music, and even 30-second previews…

The people doing the lobbying are the mainly the major music publishers together with some hangers-on, who see revenues for CD and DVD sales dropping. They claim “you can’t compete with free”. You would think that they might eventually learn the message demonstrated by Apple’s iTunes, that you can make money competing against free services (in this case, illegal downloads) by offering a better or more convenient service. Just the same as the bottled water industry competes successfully against tap water.

In fact, there is no difference between competing against another competitor who is charging for goods or services, and those who give them away – if you don’t understand why, take a look at this explanation on techdirt or download Chris Anderson’s book Free: The Future of a Radical Price about competing with free products, which is as it happens, available free of charge.

If the music industry can only think of increased use of DRM as the way to survive and doesn’t understand how free competition works, their future looks bleak indeed.

DRM will always be broken sooner or later – the technically savvy find a way to prevent it protecting the content and people will find a way to pass the cracked content on. Only the uninformed honest customers suffer because their use of content bought legally is restricted, whereas the illegal content swappers are not. That’s no way to treat your customers.

If ISP’s are compelled to cut people’s access to the internet, if caught swapping content online, the swapping will simply move offline – today if you want to swap content offline you can lend your friends a hard disk full of content or use a legal media swapping service such as hitflip.com. The possibilities will expand if DRM spreads further. Indead, given the poor deals that artists get from established media companies, it surprises me that more artists don’t market themselves via magnatune or CD Baby and cut out the incompetent marketeers of the traditional music labels.

No brainer

John — Thu, 10 Sep 2009 05:12:31 +0000

I wouldn’t have thought you need to have a degree from the LSE to realise that the most effective way to reduce global CO2 emissions is to reduce the population. However that is what they have just stated in a new report (Fewer Emitters, Lower Emissions, Less Cost):

It’s always been obvious that total emissions depend on the number of emitters as well as their individual emissions – the carbon tonnage can’t shoot down as we want, while the population keeps shooting up.

This is the first time I can recall seeing someone “in authority” state what is blindingly obvious. According to the report, 40% of all pregnancies are unintended and every $7 spent on family planning over the next four decades would reduce global CO2 emissions by more than a ton, where a minimum of $32 would have to be spent on low-carbon technologies to achieve the same result.

Now let’s see the western governments finally take some sensible action on global warming for a change and ramp up aid programs for contraception and family planning in the countries with rapid population growth.

Broken down

John — Mon, 20 Jul 2009 20:27:17 +0000

Today’s El País contains a cartoon, of a minister saying:

Ampliaremos la edad de jubilación a los setenta, pero no os preocupeis, a partir le los cuarenta ya no os contrataremos

(“We’ll raise the retirement age to 70, but don’t worry, we won’t hire anyone over 40.”)

Which is reflects perfectly the current thinking of nearly all European politicians and employers. Our neighbour is a head hunter for the medical industry, and she tells us it is still common to be asked to find a highly skilled professional. But not older than 35, please. If she submits a profile for someone who is older, she runs a real risk of irritating and losing the customer.

No-one has ever been able to explain how the dual attitudes that the cartoon summarises will actually help ease the pressure on the state pension funds.

The USA seems to be a little bit further down this road than we Europeans – Ruth subscribes to the Harvard Business Review and we regularly read articles pointing out that the baby boomers are going to want (need!) to carry on working past their retirement age because of the financial crisis, and that companies are starting to face a shortage of skilled labour caused by the falling birth rate. They urge companies to think about how to make themselves more attractive to older employees. Simple things like offering more flexible working hours.

On this side of the Atlantic, employers still seem to be embedded in a more ageist mindset and we notice that it is very rare for the companies where Ruth and I work to employ older people. Ruth works freelance, and gets to see a different company every couple of years, on average.

On a positive note, last weekend our 20-year old dishwasher broke down for the third time, and we went to Media Markt in the local shopping mall to buy a replacement. We both noticed that all the salesmen in the white goods department were over fifty. Maybe times are changing, but this is the first occasion that we have noticed a company apparently making a strategic decision to select older staff.

Lord Saatchi on property bubble blindness

John — Fri, 08 May 2009 20:06:05 +0000

There’s a good, short piece by Maurice Saatchi in today’s Times on how the property bubble crept up on us without being noticed. It criticizes the focus – at least in the UK – on the consumer price index, which measures the rate of inflation on the weekly shopping basket, but doesn’t take account of the price inflation of assets, such as housing. Not good if the population is following the mantra:

I borrow money.

I buy an asset.

The price goes up.

I exit the asset.

I repay the loan.

I keep the profit.

Of course, we can’t all get rich by buying and selling houses to each other using other people’s money. Inflation on house prices ran at six times the target set for the CPI inflation rate in the last five years. Debt inflation was running at over four times the target rate. It should have been obvious that we were heading for trouble, but it wasn’t on most people’s radar.

Not everyone was blind, by the way:

Max Otte predicted the current crisis in 2006 (Der Crash kommt)
Nassim Nicholas Teleb warned in his book “The Black Swan” published in 2007, the year the current crisis started to unfold, but a year before Lehmann Brothers collapsed, of the likelihood of a massive financial collapse, due to the way banks and governments ignored certain types of risk
And there have been other warning fingers, such as Mike Adams, warning back in January 2006 that the US property market was ripe for a collapse.

Most people, however, weren’t listening.