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S&P Projects 60% Of All Countries Will Be Junk-Rated By 2060, Sees Increasing "Tests To Social Cohesion"
When even S&P tells you that within 5 decades, nearly two-thirds of the world will be junk rated, you know it is time to close the history books on the current system. In a long-overdue analysis on the impact of demographics, titled, "Global Aging 2010: An Irreversible Truth", S&P analyst Marko Mrsnik, who made Greece's shitlist earlier this year for being the first to downgrade the country and set off the European scramble to launch a $1 trillion rescue package for the European dominoes, has come up with the first report that acknowledges that not only is the US and UK AAA rating not set in stone, but, far more surprisingly, is the admission that the current system is set on an unsustainable course. To wit:as the chart below suggests, S&P now expects that the number of countries rated "spec grade" to increase from 18% currently in a hypothetical sovereign ratings distribution, to over 60% by the late 2040s as deficit spending (and debt funding) explodes. Additionally, in a world attached to reality, the credit matrix would make the AAA sovereign rating history by 2030. Of course, this being S&P, the rating agency is terrified of actually confirming what everyone knows, and qualifies this as follows: "The hypothetical ratings should be regarded more appropriately as an illustration of the credit dimension and profile of the demographic challenge that governments face and not as an indication of expected credit performance." Alas, the real, non-hypothetical outcome will be far worse: As Mrsnik himself says later, "The challenges ahead are daunting for the vast majority of sovereigns covered in this survey, particularly in cases where market pressures are pushing policy makers to embrace budgetary consolidation simultaneously with structural reforms of pension and health-care systems. For some sovereigns, this may put the relationship between the state and electorate under strain and severely test social cohesion." Translation: war.
On sovereign rating distributions:
Rising deficits likely would lead to downward pressure on our hypothetical sovereign ratings. This would be the case even if debt ratios remained at relatively low levels because of the sharp upward trajectory of fiscal deficits. When presented graphically, the collective deterioration in the hypothetical ratings on the 49 sovereigns in our sample becomes clearly evident (see chart 10). The erosion in sovereign ratings would start in 2015, when hypothetical ratings on a number of highly rated sovereigns come under pressure (see "Methodological And Data Supplement" for explanations of the model). Although the downward drift is impressive by any standards, equally noteworthy is the nonlinearity of the change in theoretical ratings over time. Ratings would weaken somewhat in the second part of this decade, especially at the upper end of the rating scale, while the number of sovereigns with speculative grade ratings would fall until 2020. From that moment onward, as the full budgetary impact of population aging kicks in, the projected downward transition in sovereign ratings becomes predominant. Before then, in the real world beyond "fiscal autopilot," there could well be the risk of a mistaken sense of security taking hold that works against the changes necessary to manage the rising fiscal pressures in future years.
The hypothetical ratings evolution shown here is derived by taking into account GDP per capita, general government balances, and net debt levels, and are not intended to serve as a prediction of actual outcomes (see chart 10). In practice, the hypothetical ratings may overstate the decline in creditworthiness. They are benchmarked against budget balances, net debt, and GDP per capita levels today, whereas it is of course possible that the medians themselves could worsen as an ever-larger number of rated sovereigns is squeezed by the costs of their aging populations. Moreover, Standard & Poor's may give more credence to mitigating credit strengths than assumed in the model. The hypothetical ratings should therefore be regarded more appropriately as an illustration of the credit dimension and profile of the demographic challenge that governments face and not as an indication of expected credit performance.
And in an ironic twist, we read the first ever Mea Culpa issued by S&P, when the rater confirms its rose-colored glasses bias from as recently as 4 years ago.
From Bad To Worse: Comparison With Previous Standard & Poor's Reports On Population Aging
For the sovereigns covered in our previous reports, the difference between this year's results and those published in 2006 and 2007 appear significant (see charts 19 and 20). First and foremost, the difference in our view appears to be a consequence of a significant deterioration in their general government balances and net debt levels since 2007 due to the onset of the economic and financial crisis. While the initial budgetary situation actually improved between 2006 and 2007, since then, the widening of fiscal gaps and rises in debt outstanding has been substantial. This puts the sovereigns in a relatively more unfavorable position in our long-term simulations of public finance indicators.
The report also includes updated long-term projections on real GDP and individual age-related spending items. In this context, there is a significant change as far as the long-term projection of health-care spending in the EU is concerned. To more completely capture nondemographic factors, which had been the main driver of increases in health-care costs in the past for EU sovereigns, we apply the so-called "technology" scenario as opposed to the "AWG reference" scenario, applied previously. The "AWG reference" scenario is in our view tilted toward the optimistic side as it does not fully recognize the past drivers of growth in health-care spending (see table 9 below).
And here is S&P's prescription for a doomed world:
The challenges ahead are daunting for the vast majority of sovereigns covered in this survey, particularly in cases where market pressures are pushing policy makers to embrace budgetary consolidation simultaneously with structural reforms of pension and health-care systems. For some sovereigns, this may put the relationship between the state and electorate under strain and severely test social cohesion.
Nevertheless, our study suggests that unless advanced sovereigns embrace reforms at a faster pace, the fiscal pressures will become increasingly unsustainable. At the same time, the aging demographic profile of their electorates could well make the political climate for reforming pension and health-care programs even more difficult than it is currently.
Against this background, we believe that growing age-related fiscal pressures call for decisive policy responses by governments in many countries quite soon –- and certainly over the coming decade. As we outline in this report, we do not believe that higher economic growth, if it can be generated, alone will suffice to tame future fiscal pressures. That said, we expect that a crucial growth-friendly policy that many governments will have to embrace is to find ways to encourage their people to remain active members of the labor force for many more years than is the norm today.
At the same time, for a growing number of sovereigns, the need to tackle fiscal deficits and implement pension and health-care reforms over the coming decade is a pressing policy issue, given the rapid growth in government debt burdens. This is an important policy issue not just from the standpoint of maintaining the creditworthiness of sovereigns and the sustainability of their public finances. At least as important, in our view, is that it may be vital to maintaining social stability. After all, changing the scope of public pension and health-care provision can, if embraced soon enough, help spread the impact over an extended period, with the burden of adjustment shared across generations of taxpayers and voters.
What a polite way of Mr. Mrsnik to say it's game over.
Full S&P report link
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Translation: revolution. (bitchez!)
Bingo.. there is no way this will last that long.. 2060? Really guys? ...never going to be achieved without a revolution.
Yep, there's NO POSSIBILITY that the current system will be around in 2060.
Shit... the system that comes after our current one will probably be in trouble in 2060!
To think that any one person or any organization can hazard a guess as to what our world will look like in 50 years, let alone the economic landscape, is laughable to the nth degree cubed.
I'm left speechless to think that the crew at the S&P has any credibility projecting what the President will have for lunch tomorrow, let alone what the world will look like on Tuesday. To be fair, the S&P is predicting that several turkeys will die in the weeks leading up to Thanksgiving. I give them 3 to 2 odds they're correct.
+(50*365)-3
Of course, the hidden message here is that the S&P itself will still be around in 50 years to rate 60% of the world as junk.
Thank God, saved by the S&P masters of the universe from "investing" in crap fiat crap. :>)
I totally agree, CD. Here's another piece missing from the premise that we are all going to be broke in 2060: Not everyone can be a debtor nation. Someone has to be a creditor and there isn't anyone around (not even the Chinese) with pockets that deep.
Have you noticed a major ramp up in the mainstream media of stories about aliens from outer space? Hell, we've been told even the Pope will welcome them with open arms. With tongue firmly in cheek, but also some serious consideration, the aliens will be the new creditor and all of Earth will be the debtor.
What's that you're asking about collateral? Our bodies are the collateral. They've been sampling over the past 50 years and have developed a taste for human.
Now, before this is completely dismissed, I ask you to consider this. If you were the sociopath powers that be and you knew the economic system was about to implode, would you try to create the biggest baddest nastiest most frightening external threat there ever was to solve all your problems?
Just askin' because I am absolutely certain this very idea has been considered in the halls of the powers that be. One only needs to read some history of black ops programs from the 50's to the 90's to see that this ideas is tame compared to some of the stuff the government pursued.
"How to Serve Man"
How to serve mankind:
Stew in debt, add a dash of QE (but first siphon off the profit for your bankster souffle) and stuff with inflated green paper to absorb the savings-runoff.
Serves none!
CD,
There is at least one "conspiracy theory" that TPTB will use the arrival of aliens in 2012 as an excuse to impose a One World Leader in order to negotiate with them on behalf of the planet! Maybe they will try it?
Anyway, it goes hand-in-hand with all the superstitious bullshit around the interwebs about Mayan prophecies, 2012 and Revelation. Notice also that most disinformation alternative media sites have a large dose of UFO nonsense.
When people are scared and/or confused they quickly turn to supernatural explanations (the origin of gods of thunder, lightning, pestilence, etc) ... so we can be sure TPTB will take full advantage of that where possible, particularly with the heavily superstitious-religious American tax livestock.
I agree with you. This system is going to implode in a year or two and the next system will be imploding by that time. There is no way that this game of debt moving and currency war is going to last for another 50 years, it just won't.
An avalanche is not on a slow timeline, snowballin fast now!
There will never be a revolution. Americans are too fat dumb and lazy. They will sit in there easy chair collecting food stamps,and hand over their guns to uncle Sam "in the name of security" .
You are clearly not from Texas.
Oh f'ing secede already; no one is stopping you.
WE CALL!
Buddy, I left already. Just 'cause I was born there doesn't mean I think like them.
They just don't understand texans. Or Oklahomans. One of my uncles who was a bit into the fake bullcrap blacks evolved from monkeys pseudo science from the 60's. He started doing a complete trace of our family lineage. He was just sure he would find kings and queens and great scientists as he went back. He got about 5 generations deep and started running into really nasty outlaws and got all mad. LOL
The only real difference between texas and oklahoma is our cops are meaner. Because our criminals are more of a pain in the ass.
http://www.youtube.com/watch?v=QTVnpr2ZqZg
First the political "leaders" of the world will try to focus anger outwards, towards neighbors, or inwards, towards minority groups.
Populations will have to be smart enough to see through this obfuscation and understand that their own government/plutocracy is the real problem.
This is news?
2060 seems incredibly optimistic.
and how are things over at the cafe american?
Yea, I laughed out loud when I saw 2060. I think there's a high chance that at the time the world politics will be dominated by post-WW4 trade wars between Mongolia and Cameroon.
50 year projections? Really?
If you want to know what 50 year projections are worth, take a gander some of those generated in 1960. We all thought we either be digging out of WWIII's nuclear rubble, or golfing on the moon.
GMAB
flying cars for everyone!!
50 year projections ar as worthless as 5 day projections. -)
And I'll be taken care of by my Robot man servant!!!
Yeah, 50 year projections are pointless. In 50 years we'll be out of oil. How about we troll the thread with that. Hears me RawR!!
In 50 years we're out of oil!!
In 50 years we are back to steam!!
In 50 years was was sovereign, centralized government is gone!!
In 50 years we're out of Elephants!!
In 50 years we're out of Bananas!!
In 50 years we're out of gum!!
In 50 years we'll have filled every square inch of the planet with people!!
They are just now figuring this out? Has S&P been cut to junk yet?
I went to a Deadmau5 show this past weekend. My mind was blown and my face melted. So with that inspiration I explored reigons of the EDM universe i was not too familiar with. That led to this playlist which has enough bass to put Oakland to shame ;)
meh. (a playlist): http://www.youtube.com/view_play_list?p=48CE3C94FAB01826
please forgive the semi-spammy nature of these things, I'm just trying to share and hopefully bring some bump to those of y'all who are in need.
I suggest you have never been to a Leftfield gig, if you think this is bass ;-)
Leftfield was the 1st electronic music CD i ever bought :D i have lots of family in southafrica so my bro turned me onto them early. would absolutely love to see em live tho.
Give up Tyler - the market does not care.
I think this is a code. Rather than 50 years from now, they really mean 50 months.
They may be optimistic.
Maybe 50 days.
Time for a nice old-people-preferring deadly virus of some kind to clean house.
2020 maybe. Probably 2015.
How the fuck does anyone knows what will happen in 60 years...
"For some sovereigns, this may put the relationship between the state and electorate under strain and severely test social cohesion."
Ha ha...or at least strain their relationship with S&P!
Yeah...about that outlook: Junk memo...
2060 ?????
oh go fuck yourselves S&P you suck
They grade on a curve. Today's junk is somone treasure(ie) tomorrow. S&P will change their criteria as the market evolves. 10% will be rated the best. 40% rated okay. 50% rated junk.
2060?
Did they just hire Celente?
DOW 11K. Wow.
Looking forward to S&P 1400 when NFP prints -300,000.
50 Years to reach Junk status??
Hahahahahahahaha.
Ha.
It wasn't long ago we were wearing our DOW 10k hats. Times change quick.
back to the April highs now. market irrevocably broken. they will keep it up for year end bonus one more time...
Yes , But the Dow crossed 11,000. Bad news is good. 2060, What a joke. I'll be a dried up fucking corpse by them. What about like now?
War.
It is about time someone acknowedged what is going on between the US and Pakistan. We send missiles into their coutry to destroy people and stuff. They attack fuel supply trucks and close the border.
McCrystal and Gates have bailed out, and now Gen Jones. Other generals have openly contradicted the CINC on various policy decisions. Foreign policy is as much of a disaster as the economic policy.
Anything or anybody who/that is silly enough to make economic predictions 50 years into the future cannot be taken seriously.
Look at it this way - who in 1960 could have ever gotten on the dart board of today's economy?
2060? What a laugh. By 2030 we will most likely be recovering from a 3rd world war.
There is no linear extrapolation from the spring of 1930 to 1950.
I'm trying to navigate this week, 2060 might as well be 3060.
Love the zerohedge, truly. But you know, I have this fatalistic image in my head that someone in the future will dig a server out of the rubble and find these posts - wondering aloud "Why didn't anyone listen?".
Why indeed.
That's the plan. Bankrupt all the countries and corporations take over. Seriously did you guys NOT see this coming?
Who will have the courage to be first to downgrade THE WORLD to JUNK?
This is a "calculated" prediction on their part:
a) it's virtually certain to happen within their 50yr timeframe, so they can't go wrong
b) if it happens in 5yrs, or even next year, they can still say "we predicted that, just our timing was off"
c) if it doesn't happen, who from today is going to be around to check up on their prediction? again, they can't go wrong
Here's my can't-go-wrong prediction:
-in 50 years the earch will circle the sun every 365 days
oh, forgot to add:
so by inference, they're saying those new-fangled 100-yr bonds are junk
One thing no one ever mentions. The boomers were the most productive generation in addition to being the largest. The boomers spent the past 40-50 years pouring money into the system (SS, Medicare, etc.). Statistics (census.gov) prove that individuals generally die long before they use any more than half of what they put into the system. (The age to begin to "collect" coincides pretty closely with the end of the average life span of most men and within 10 years of the lifespan of most women.)
Could it possibly be that this whole fiasco is nothing more than the government and banking industry doing their damnedest to prevent the boomers from collecting their hard-earned retirement funds that our government and banksters have been using for decades to benefit themselves?
50 years. Please. Did you see how forecasters did on this year's hurricane season?
Got a solid prediction for ya: This evening, ol' Tuesday Ben will snarf down a delicious burger.
Perpetual motion machine will be invented by 2050 and all children will be above average. All is well.
This is a ludicrously specious piece. Did someone actually get PAID to put this nonsense together?
What a profound joke.
Anyone with a fundamental understanding of math knows that it's ALL SPECULATIVE GRADE - right now!
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