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Australia8532 Posts
The World Economy
Many of us are well aware of what happened during the Global Financial Crisis (GFC) and the economic implications of the recession. However, as we now edge nearer to the end of 2013, I thought it would be interesting to have a look at some data on the world economy. The information below is from a presentation to Australian investors and therefore highlights Australia’s general position. Despite this, I have isolated the information I believe provides some interesting insights into the state of the world economy.
The first graph is World GDP Growth in terms of real growth from 1950 – 2013. It’s really interesting to see the continuous growth figures on a global average. Again, this is a helicopter view of the world economy, so while individual countries may be struggling, on average the world has grown in real terms.
So who makes up the world? The below chart shows the current state of affairs – interestingly, China is forecast to eclipse the US by the year 2016, where they will officially obtain the title of world’s largest economy.
Now that we understand how the world is tracking – how about individual countries? If we look at the world’s largest 20 economies in terms of growth rates we can easily compare the countries. Notably, this graph only contains the world’s 20 largest countries, so there are some obvious names missing that don’t make the cut.
An interesting result of the current economic situation is that the current forecasts for 2014 show an overall positive (or neutral for Spain) growth result for all 20 of the biggest economies, with average world growth at 3.1%. Notably, everyone is screaming about the slowdown of the Chinese economy but the data suggests a sustainable growth rate of approximately 7.5%. While this does resemble a slowdown of sorts as China’s 50 year average growth rate is around 8.25%, it is still a significant level of growth in the current economic climate.
The next topic that has received a significant amount of attention around the world is the issue of Government debt. Recent data indicates a wide range of results for Governments of the Top 20 countries. Notably, Japan’s level of net debt is rather outrageous! However, as we will see later, they maintain extraordinarily low interest rates to allow the debt to be serviced. (Read: Abenomics).
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*Poland is meant to read Portugal
Now as an Australian, seeing our 29% net debt level on that graph compared to the rest of the world is quite comforting. However, the issue is where are we (Australia and the world) heading?
The above graph shows Government Budget Balances. What does that mean? Well it is the rate of growth of the budget deficit/surplus. I.e. a negative figure represents an increase in a deficit (or decrease in surplus) and a positive figure the opposite. Based on revised data, the Australian deficit is growing at approximately 2% of GDP per annum. So it is not the raw debt figure that is worrying, but rather the direction we are heading. Another note – South Korea is the only positive figure; maybe it has do with e-Sports?
Another key economic indicator is unemployment. Generally, we regard anything below 5% unemployment as “full employment” in the economy. The below graph has some truly worrying results for Greece and Spain. Notably, in Spain their unemployment sits at 26.3% but their YOUTH unemployment is hovering around 50%! Ironically, Japan has one of the lowest unemployment rates in the world.
I just found the next graph interesting to see a comparison across the world. As mentioned previously, the Japanese interest rate at 0.8% allows for their enormous debt levels to be serviced. However, this has a pretty damaging effect on retirees/savers.
The next issue presented is that of taxation – well to compare this data across a range of countries, the below represents total taxation as a percentage of GDP. Unsurprisingly, European countries top the charts with most developing countries further down the list. People in Australia, and the US, generally cry murder when there is discussion on raising taxation – I know there are far more factors to be considered before making that decision – but the data shows at least relative to global standards, there is room to move.
I know this graph is Australia focused but I thought it illustrated some important points. The blew bars represent Australia’s largest company’s return on shareholder’s funds. You probably notice the sharp upturn from 2004/5 onwards?
The red lines represent the 30 largest US companies returns at a consistently higher level. The explanation for the increase in the Australian results correlates to a significant increase in remuneration packages for top executives/CEOs etc. Now obviously if someone doesn’t deserve the money they are earning, that’s a totally different issue. But if they are adding large amounts of value to shareholders, their remuneration needs to reflect their efforts. And the data supports this. Ultimately, this raises the question of how much we pay our politicians – how do you attract great talent if your remuneration is simply not competitive.
I hope the above information was interesting to some of you; I found the overall message to be quite encouraging for the world in general (except for a few countries). I hope this starts some meaningful discussion.
Cheers
+ Show Spoiler +NB: I did not create the graphs myself 
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Interesting info.
If I'm not mistaken the brazilian central bank has reduced the prediction of economic growth of the country to 2.5% when initially had expected 4.5% (and is set as 3.0% in your graph).
Funny to see Brazil with 38% of taxation rate, right below European countries, and yet our country general infrastructure/health/education are so shitty compared to them. The destruction power of corruption and bad administration is quite impressive.
Also, how did Japan acquire such a huge government debt? Was it due to the tsunami?
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In regards to the final graph, could it be related to a bubble that later burst? In this case value was not delivered to investors who didn't bail in time. This applies to financial companies and banks but not the resource / energy sector I think.
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FREEAGLELAND26781 Posts
Thanks for this bkrow. Love numbers on a worldwide scale!
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Australia8532 Posts
On August 28 2013 11:11 fabiano wrote:
Interesting info.
If I'm not mistaken the brazilian central bank has reduced the prediction of economic growth of the country to 2.5% when initially had expected 4.5% (and is set as 3.0% in your graph).
Funny to see Brazil with 38% of taxation rate, right below European countries, and yet our country general infrastructure/health/education are so shitty compared to them. The destruction power of corruption and bad administration is quite impressive.
Also, how did Japan acquire such a huge government debt? Was it due to the tsunami?
http://en.wikipedia.org/wiki/Abenomics
Basically, issuing a ton of government bonds to shock the economy into shape
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In regards to politicians, higher pay and renumeration wouldn't necessarily attract great leaders. It would attract leaders who create more money for themselves. Which is what is largely happening now, with politicians able to receive incredible benefits for being in office.
You'd have to tie politician reward in many categories to the country as a whole or the average citizen, their healthcare is that of the average citizen, their salary that of the average, etc.
Its the same problem with many CEOs trying to maximize short term gain, rather than long term stability.
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On August 28 2013 11:11 fabiano wrote:
Interesting info.
If I'm not mistaken the brazilian central bank has reduced the prediction of economic growth of the country to 2.5% when initially had expected 4.5% (and is set as 3.0% in your graph).
Funny to see Brazil with 38% of taxation rate, right below European countries, and yet our country general infrastructure/health/education are so shitty compared to them. The destruction power of corruption and bad administration is quite impressive.
Also, how did Japan acquire such a huge government debt? Was it due to the tsunami?
Its worth noting, you have vastly more people than these european countries, and less absolute wealth per person. Even if taxation is 38%, its 38% of a salary that is under 20% of the average person from a european country, so you are still collecting far less wealth in absolute terms.
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On August 28 2013 11:11 fabiano wrote:
Interesting info.
If I'm not mistaken the brazilian central bank has reduced the prediction of economic growth of the country to 2.5% when initially had expected 4.5% (and is set as 3.0% in your graph).
Funny to see Brazil with 38% of taxation rate, right below European countries, and yet our country general infrastructure/health/education are so shitty compared to them. The destruction power of corruption and bad administration is quite impressive.
Also, how did Japan acquire such a huge government debt? Was it due to the tsunami?
No their debt was already high before the tsunami. Part of the reason why they have such high debt with low interest rate is that 90% of it is domestically held. Add to that that there has been deflation or little inflation in Japan for a while which means ¥100 now will be worth more in the future so even a small interest rate will be profitable (interest+deflation). This all makes Japan a special case really.
That's not to say their debt isn't reaching dangerous levels though, they've already been warned by the IMF to be cautious with their debt.
Edit: Japan already had these crazy debt numbers long before Abenomics was even initiated. It does increase the deficit and debt further though.
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On August 28 2013 11:34 RvB wrote:Show nested quote +On August 28 2013 11:11 fabiano wrote:
Interesting info.
If I'm not mistaken the brazilian central bank has reduced the prediction of economic growth of the country to 2.5% when initially had expected 4.5% (and is set as 3.0% in your graph).
Funny to see Brazil with 38% of taxation rate, right below European countries, and yet our country general infrastructure/health/education are so shitty compared to them. The destruction power of corruption and bad administration is quite impressive.
Also, how did Japan acquire such a huge government debt? Was it due to the tsunami? No their debt was already high before the tsunami. Part of the reason why they have such high debt with low interest rate is that 90% of it is domestically held. Add to that that there has been deflation or little inflation in Japan for a while which means ¥100 now will be worth more in the future so even a small interest rate will be profitable (interest+deflation). This all makes Japan a special case really. That's not to say their debt isn't reaching dangerous levels though, they've already been warned by the IMF to be cautious with their debt. Edit: Japan already had these crazy debt numbers long before Abenomics was even initiated. It does increase the deficit and debt further though.
Japan essentially borrows money from its own people. They are one of the biggest money lenders to other countries in Asia.
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On August 28 2013 11:28 bkrow wrote:Show nested quote +On August 28 2013 11:11 fabiano wrote:
Interesting info.
If I'm not mistaken the brazilian central bank has reduced the prediction of economic growth of the country to 2.5% when initially had expected 4.5% (and is set as 3.0% in your graph).
Funny to see Brazil with 38% of taxation rate, right below European countries, and yet our country general infrastructure/health/education are so shitty compared to them. The destruction power of corruption and bad administration is quite impressive.
Also, how did Japan acquire such a huge government debt? Was it due to the tsunami? http://en.wikipedia.org/wiki/AbenomicsBasically, issuing a ton of government bonds to shock the economy into shape
Not completely. A lot of the debt was already accumulated in the Lost Decade, where they kept trying to stimulate the economy, but would then stop before it gained traction. There's also the problem they've had with deflation, which has pushed the debt up quite a bit.
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Makes me a bit more hopeful about the economic condition of the United States.
THE SKY WAS FALLING! Until I saw the comparisons...now I'm relieved a bit, but the sky might still fall!
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On August 28 2013 13:16 zachMEISTER wrote:
Makes me a bit more hopeful about the economic condition of the United States.
THE SKY WAS FALLING! Until I saw the comparisons...now I'm relieved a bit, but the sky might still fall!
Just because the entire world goes a certain way doesn't mean a crisis isn't inbound 
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By the way, what is "Net Debt?" If I remember correctly, the US's current debt is over 100% of GDP. Almost $17,000,000,000,000.
Edit: does it refer to how much more is being spent per year than being taken in? That would be my guess.
Edit again: Google is a helpful tool.
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Australia8532 Posts
On August 28 2013 13:51 Introvert wrote:
By the way, what is "Net Debt?" If I remember correctly, the US's current debt is over 100% of GDP. Almost $17,000,000,000,000.
Edit: does it refer to how much more is being spent per year than being taken in? That would be my guess.
Edit again: Google is a helpful tool.
Lol - I was just about to google it but as far as I am aware it is gross debt less the value of the assets held
Your comment on "how much is spent vs being taken in" - i think you may be referring to 'deficit' which is a very different thing to 'debt'
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On August 28 2013 13:48 Introvert wrote:Show nested quote +On August 28 2013 13:16 zachMEISTER wrote:
Makes me a bit more hopeful about the economic condition of the United States.
THE SKY WAS FALLING! Until I saw the comparisons...now I'm relieved a bit, but the sky might still fall! Just because the entire world goes a certain way doesn't mean a crisis isn't inbound
Touche my friend. Touche.
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On August 28 2013 13:51 Introvert wrote:
By the way, what is "Net Debt?" If I remember correctly, the US's current debt is over 100% of GDP. Almost $17,000,000,000,000.
Edit: does it refer to how much more is being spent per year than being taken in? That would be my guess.
Edit again: Google is a helpful tool.
Budget deficit/surplus what refers to being spent /taken in per year over that fiscal years federal budget. Net debt is all the outstanding debt the US has. No, the US current debt is not over 100% of the GDP.
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GDP really isn't a terribly good figure to measure the well being of people. In the United States during World War II, GDP was increasing but nobody had a good life; you had men fighting in the war and everyone else working in factories. Anyway, I don't see things getting any better in the future. Nobody even has jobs here in the United States. A large amount of college graduates don't have jobs and a lot of the ones that do have jobs that don't require degrees. On a side note, we have the nuttiest politicians in the world here in the United States. If anyone has been listening to the news, there has been talk of the United States bombing Syria. Iran has said they will attack Israel if this happens. This whole thing is going to turn into a mess.
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Australia8532 Posts
On August 28 2013 14:24 LittleRedBoy wrote:
GDP really isn't a terribly good figure to measure the well being of people. In the United States during World War II, GDP was increasing but nobody had a good life; you had men fighting in the war and everyone else working in factories. Anyway, I don't see things getting any better in the future. Nobody even has jobs here in the United States. A large amount of college graduates don't have jobs and a lot of the ones that do have jobs that don't require degrees. On a side note, we have the nuttiest politicians in the world here in the United States. If anyone has been listening to the news, there has been talk of the United States bombing Syria. Iran has said they will attack Israel if this happens. This whole thing is going to turn into a mess.
Well, there's nothing like nuclear winter to get rid of any worries about the economy
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On August 28 2013 13:58 bkrow wrote:Show nested quote +On August 28 2013 13:51 Introvert wrote:
By the way, what is "Net Debt?" If I remember correctly, the US's current debt is over 100% of GDP. Almost $17,000,000,000,000.
Edit: does it refer to how much more is being spent per year than being taken in? That would be my guess.
Edit again: Google is a helpful tool. Lol - I was just about to google it but as far as I am aware it is gross debt less the value of the assets held Your comment on "how much is spent vs being taken in" - i think you may be referring to 'deficit' which is a very different thing to 'debt'
No, I know the difference there. I didn't word that the way I wanted to. I know the deficit is the amount spent over the $$ revenue, and the debt is essentially the accumulation of that. What I was trying to say...I don't know. I didn't know if it was just another word for deficit, but that made little sense, hence my initial confusion.
But I'd be less confused by this if it had some sort of linked source.
No, the US current debt is not over 100% of the GDP.
Really? The GDP is about 15-16 trillion, and the total debt so far is almost 17 trillion.
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Gov net debt value for Poland is wrong. Polish constitution forbids going over 60% in relation to GDP. Polish debt is around 57% of GDP.
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