Ageing population

[cynic]

As an exercise, I put the following scenario to everyone.

Take any random country and have it export nothing. It'll continue to have service industries, it'll continue to grow some food and so on for local consumption, but all exports cease.

What do you expect to happen to that country economically?

My answer:

On day 1 I expect nothing much to happen apart from some limited loss of employment in exporting industries that'll likely be replaced by employment in services.

Slowly but surely however I expect them to become impoverished. Because they'll still be importing all manner of things, since they can't possibly produce everything themselves, but they're not exporting anything. That being so, they'll have a one way flow of money out of the country.

The longer it continues, the further they'll slide. Everyone has a job, services are happening, but there's a constant drain of wealth out of the country to pay for imports and nothing coming back in. As the currency starts to lose value, interest rates must be raised to keep inflation in check and slow the slide. Everyone feels poorer, but nobody's too sure exactly why given there's plenty of activity, people have jobs and so on.

Can anyone debunk my thinking here?

If nothing's being exported except a perpetually declining currency, then no wealth of real substance is leaving the country's shores, and yet imports of actual substance continue (akin to paying bills via the use of unlimited credit).

It's not until the creditors (source of imports) stop exporting to this unproductive country, that it's impoverishment will be ultimately realised.

 

[Smurf1976]

It's not until the creditors (source of imports) stop exporting to this unproductive country, that it's impoverishment will be ultimately realised.

Won't it show up sooner though?

Eg fuel is priced in USD so as the currency declines fuel gets expensive for locals.

Or someone who wants to take an overseas holiday finds that it's now cost prohibitive to do so. They still have similar funds available in local currency, but that doesn't buy so much anymore.

Cars are imported so they get expensive. People still have cars, but the fleet slowly but surely gets older and runs down.

Or things like music festivals are cancelled because no overseas act is willing to perform for a price expressed in local currency and converted to USD or GBP it's cost prohibitive to pay them,

And so on. All seems reasonably OK but one by one things just become unaffordable to ordinary people or where scale is required just fall over completely.

 

[cynic]

Won't it show up sooner though?

Eg fuel is priced in USD so as the currency declines fuel gets expensive for locals.

Or someone who wants to take an overseas holiday finds that it's now cost prohibitive to do so. They still have similar funds available in local currency, but that doesn't buy so much anymore.

Cars are imported so they get expensive. People still have cars, but the fleet slowly but surely gets older and runs down.

Or things like music festivals are cancelled because no overseas act is willing to perform for a price expressed in local currency and converted to USD or GBP it's cost prohibitive to pay them,

And so on. All seems reasonably OK but one by one things just become unaffordable to ordinary people or where scale is required just fall over completely.

I think we're (more or less) on the same page here, i.e. the realisation of impoverishment is correlated to a decline/cessation of imports into the country.

 

[farmerge]

Won't it show up sooner though?

Eg fuel is priced in USD so as the currency declines fuel gets expensive for locals.

Or someone who wants to take an overseas holiday finds that it's now cost prohibitive to do so. They still have similar funds available in local currency, but that doesn't buy so much anymore.

Cars are imported so they get expensive. People still have cars, but the fleet slowly but surely gets older and runs down.

Or things like music festivals are cancelled because no overseas act is willing to perform for a price expressed in local currency and converted to USD or GBP it's cost prohibitive to pay them,

And so on. All seems reasonably OK but one by one things just become unaffordable to ordinary people or where scale is required just fall over completely.

This scenario brings to mind countries with closed borders such as Haiti (perhaps not closed borders, but impoverished though), North Korea, Albania just to name three.

 

[Smurf1976]

This scenario brings to mind countries with closed borders such as Haiti (perhaps not closed borders, but impoverished though), North Korea, Albania just to name three.

The relevance I had in mind to the previous discussion is that mining, agriculture, manufacturing etc all export or provide an alternative to importing that product whereas administration, low value services etc don't do that.

Administration serves a purpose to the extent it's necessary to organise and otherwise facilitate production but of itself it's not bringing money in.

 

[qldfrog]

I think we're (more or less) on the same page here, i.e. the realisation of impoverishment is correlated to a decline/cessation of imports into the country.

Every import is most often compensated by printing more and more local currency which ultimately become worthless and you have crazy inflation within the country,. Zimbabwe was that scenario.pretty soon, employment becomes rare.look Haiti now.
You end up with ngo and international aid as well as emigrants sending money back home as your only exports.
North Korea comes to mind but the government still export crime and weapons

 

[sptrawler]

I don’t think battery manufacturing is an obvious one, although I do understand it’s one you are obsessed with.

And your mentality, is exactly the same as our politicians, because they also have an absolute belief in their own opinions, over common sense.

Indonesia has absolutelty screwed Australia over nickel, by demanding China build the infratructure to refine their crap nickel in Indonesia and not in China.

Is WA's once-booming nickel industry dead or just a sleeping giant?

WA's nickel industry has collapsed this year but multi-billion-dollar projects are still being developed with an eye on a future recovery.

www.abc.net.au

They are now trying to encourage Tesla to build a battery manufacturing plant in Indonesia, that's the difference between a fat ar$ed lazy Govt and a sevond World Govt thatcis progressive, like we were in the 1960's. Lol

Loading...

www.reuters.com

Anyway completely off topic, just an angry old bloke who has worked his ar$e off and now have to listen to well off young blokes that have lived through the "Wonder years". Lol
A shock is coming.

 

[Dona Ferentes]

Anyway completely off topic, just an angry old bloke who has worked his ar$e off and now have to listen to well off young blokes that have lived through the "Wonder years". Lol
A shock is coming.

 

[Value Collector]

And your mentality, is exactly the same as our politicians, because they also have an absolute belief in their own opinions, over common sense.

Indonesia has absolutelty screwed Australia over nickel, by demanding China build the infratructure to refine their crap nickel in Indonesia and not in China.

Is WA's once-booming nickel industry dead or just a sleeping giant?

WA's nickel industry has collapsed this year but multi-billion-dollar projects are still being developed with an eye on a future recovery.

www.abc.net.au

They are now trying to encourage Tesla to build a battery manufacturing plant in Indonesia, that's the difference between a fat ar$ed lazy Govt and a sevond World Govt thatcis progressive, like we were in the 1960's. Lol

Loading...

www.reuters.com

Anyway completely off topic, just an angry old bloke who has worked his ar$e off and now have to listen to well off young blokes that have lived through the "Wonder years". Lol
A shock is coming.

I don’t so much have a believe in my own opinion about battery factories as much as I believe in the markets ability to work out where it deploys capital. (Indonesia is lower cost production that WA nickel, even if we built a battery factory here it would struggle against lower cost materials)

We didn’t have to legislate that a McDonald’s appeared on the corner near my house, or a petrol station down the street, they just make sense, so they appear.

If a battery factory made sense it would appear, but as I said if you think it’s a great idea put a team together and invest, and prove me wrong.

If it works out I am happy too.

 

[Value Collector]

As an exercise, I put the following scenario to everyone.

Take any random country and have it export nothing. It'll continue to have service industries, it'll continue to grow some food and so on for local consumption, but all exports cease.

What do you expect to happen to that country economically?

My answer:

On day 1 I expect nothing much to happen apart from some limited loss of employment in exporting industries that'll likely be replaced by employment in services.

Slowly but surely however I expect them to become impoverished. Because they'll still be importing all manner of things, since they can't possibly produce everything themselves, but they're not exporting anything. That being so, they'll have a one way flow of money out of the country.

The longer it continues, the further they'll slide. Everyone has a job, services are happening, but there's a constant drain of wealth out of the country to pay for imports and nothing coming back in. As the currency starts to lose value, interest rates must be raised to keep inflation in check and slow the slide. Everyone feels poorer, but nobody's too sure exactly why given there's plenty of activity, people have jobs and so on.

Can anyone debunk my thinking here?

I don’t anyone here is saying we should stop exporting, I think we should be big exporters, of anything we have a competitive advantage in.

We should also import anything that makes sense to import, while also allowing the service industry to develop to its full extent.

The arguments that have been put forward By some here is that we should limit the service industry and instead focus on industrial production that we don’t have a competitive advantage in.

 

[Value Collector]

Anyway completely off topic, just an angry old bloke who has worked his ar$e off and now have to listen to well off young blokes that have lived through the "Wonder years". Lol
A shock is coming.

there is the ignore button if my opinions keep you up at night, .

I think I have made my way by working hard and having a high savings rate, and then making wise long term investments, by backing my opinions. If you haven’t done as well maybe it’s your investment opinions that need adjustment, not mine .

 

[divs4ever]

Anyway completely off topic, just an angry old bloke who has worked his ar$e off and now have to listen to well off young blokes that have lived through the "Wonder years". Lol
A shock is coming.

which ones ( wonder years ) were they ?

i recently turned 70 , and at times it was rather challenging , sure there were opportunities for those that strayed from the Uni , tie and suit path , but i ain't moaning just possibly just better prepared for a real recession/depression

 

[sptrawler]

there is the ignore button if my opinions keep you up at night, .

I think I have made my way by working hard and having a high savings rate, and then making wise long term investments, by backing my opinions. If you haven’t done as well maybe it’s your investment opinions that need adjustment, not mine .

Why would I ignore you, the only way issues are fully explored are by robust debate.

I don't think we should manufacture grid batteries here, on the basis they will be cheaper, I think they should be built here because they are strategicaly critical and we actually may also be cost competitive enough to pursue the option.

As I mentioned earlier, we aren't cost competive producing vaccine, but we have recently had a production facility built, so everything obviously isn't only about sourcing the cheapest product.
The notion that everything has to come from the cheapest supplier, is a very one dimensional view, that in a lot of cases ends up with poor outcomes.

 

[divs4ever]

I don't think we should manufacture grid batteries here, on the basis they will be cheaper, I think they should be built here because they are strategicaly critical and we actually may also be cost competitive enough to pursue the option.

yes , indeed , and if those batteries/tech are competitive , you can always license the tech/IP to international clients and stay internationally competitive that way

 

[Value Collector]

I don't think we should manufacture grid batteries here, on the basis they will be cheaper, I think they should be built here because they are strategicaly critical and we actually may also be cost competitive enough to pursue the option.

So if the batteries aren’t cheaper, how are you going to get people to buy them?

I guess you could put a tariff on the imported ones to force me to buy they local battery, but then we get back to the situation where I now have less money in my pocket to spend at the cafe.

So you basically took my barista away and made them work in a battery factory, and I miss out on my coffee because I paid extra for the battery.

That’s been my point all along, when you force a less productive industry into the economy by forcing locals to spend more on it, you lose some spending power, another industry takes the hit.

 

[Value Collector]

yes , indeed , and if those batteries/tech are competitive , you can always license the tech/IP to international clients and stay internationally competitive that way

But if that’s possible it should happen anyway. With perhaps only minor incentives.

 

[Smurf1976]

I don’t anyone here is saying we should stop exporting, I think we should be big exporters, of anything we have a competitive advantage in.

The issue is that a lot of what’s being discussed essentially is exporting versus not exporting.

Consider for example a smelter or refinery that produces $1 billion a year worth of product all of which is either exported or replaces what would otherwise be imported. At the macro national level that has a benefit to the nation separate to whatever benefits it provides to individuals via employment or profit for shareholders.

Now if we shut the refinery or smelter then what happens?

The shareholders will just invest in something else via the same or a separate company. They’ll be fine and may even benefit if the new thing is more profitable.

The workers will survive although that’ll commonly be on a substantially lower income or with less employment stability and security.

The local community now has some cafes or dog walking or whatever that it didn’t have before.

The exports however have been lost outright since service industries of the kind that typically replaces manufacturing don’t sell anything at all overseas.

So whilst I don’t suggest exports would actually go to zero, the risk is of a major decline.

Coal is our second largest export, production of which is now declining.

Gas is our third largest and production there has flatlined.

Education as an export industry is somewhat dubious at best. It was a legitimate export when it was students from wealthy countries coming here with money and spending it on education and other services. In more recent times however it has become focused on students who come to Australia, work in Australia and repatriate funds overseas.

That modern approach isn’t an export of services but rather, it’s an import of labour.

Meanwhile population is increasing.

Therein lies the concern. Not at the individual level but at the national or at least major region (eg state) level.

There’s no question that an individual can benefit, the question’s more about society and the economy as a whole.

 

[SirRumpole]

The notion that everything has to come from the cheapest supplier, is a very one dimensional view, that in a lot of cases ends up with poor outcomes.

To the capitalist purists it's all about maximum profits on paper, they disregard hidden subsidies that all countries give their own industries, and also disregard the fact that other countries have a degree of self reliance that we don't.

It will come back to bite us one day.

 

[Value Collector]

The issue is that a lot of what’s being discussed essentially is exporting versus not exporting.

That’s not what I got from it, was more about importing vs making stuff ourselves.

I don’t think anyone here thinks we should stop exporting.

The only time that I really brought up exports was in reference to the fact that if we try to divert capital towards making things ourselves it might be at the expense of diverting labour and capital away from exports.

Then people brought up saying we need “value adding industries” and I pointed out that the service industry is a value adding industry. Eg taking milk and coffee and making a coffee is value adding.

I think some of the guys here think that we can have our cake and eat it too, they want all the export industries and service industries to continue operating, but they want to all make as much of the stuff we currently import here to.

They don’t believe there is a limit to capital and labour, and don’t think it’s possible that increasing the less productive industries could negatively impact growth in high value exports and service industry.

 

[Value Collector]

To the capitalist purists it's all about maximum profits on paper, they disregard hidden subsidies that all countries give their own industries, and also disregard the fact that other countries have a degree of self reliance that we don't.

It will come back to bite us one day.

No, to me it’s about maximising the goods and services we have available with our limited capital and labour we have available.

If that means we avoid making TV’s (or batteries) here and purchase them instead, because we deploy the labour and capital to producing Iron Ore or Tim Tams, so be it.

You should probably agree that having less goods and services available over all is a bad thing for all.