Last November 3, Josephine Moulds wrote an article in the UK Daily Telegraph about George Magnus, senior economic adviser to Swiss bank UBS, who is widely acknowledged to have predicted that the US sub-prime mortgage crisis would trigger a global recession.
Her article starts: “Last March, when US Treasury Secretary Henry Paulson was busy reassuring the world that he for one was not concerned about global market gyrations, Magnus wrote a paper that now seems eerily prescient. As senior economic adviser to UBS, he suggested that the US sub-prime mortgage crisis could cause the end of the credit cycle ‘with potentially systemic economic consequences.’ ”
Magnus had predicted exactly what is happening now.
Moulds asked him: “So, how does it feel to forecast the biggest financial crisis since the 1930s? ‘I’d like to have predicted something really nice,’ laughs Magnus, who at 59 has the air of a University lecturer rather than an investment banker.”
Moulds also quotes Magnus saying: “There are a lot of things I’ve tried to analyze and predict in the past which haven’t worked out as I would have thought. This is obviously quite a big prediction that did work out and it’s always nice to be right, just from the professional kudos point of view, but it’s not pretty.”
New sort of capitalism?
Moulds wrote: “UBS unfortunately did not heed Magnus’ warnings. The Swiss bank was one of the worst hit in Europe. This year [Moulds was writing in November 2008] it wrote down $42bn (£25bn) of assets, sacked its chairman, and laid off 5,500 employees.
“Rather than indulge in a bit of ‘I told you so,’ Magnus gives a startling insight into the infinitely complex banking hierarchy, which arguably led to or, at the very least, exacerbated the current crisis.
“Despite being a senior economic adviser to the bank, he says: ‘I was in no way, shape or form in the same loop of the individuals making the decisions to buy these securities. And to be honest people were interested in what I had to say, but I don’t think anybody really believed it. There was widespread disbelief that this seemingly esoteric problem in US mortgage financing could have any bearing on anything else.’”
There are about 1,100 more words in Josephine Moulds DT article, showing what a really topnotch intellect Magnus is and telling some important things about the present situation in Britain and in the world.
Moulds wrote, “Perhaps unsurprisingly, people are now hanging off his every word. Magnus’ subsequent papers are thought to have contributed to the structure of the UK government’s rescue package.”
Moulds quoted Magnus saying, “It’s the end of the sort of capitalism that we’ve known for the last 20 years.”
But are people really paying attention to Geogre Magnus now?
The Age of Aging
Maybe not. Because his other preoccupation is to persuade world leaders and the public that the aging population is a big problem.
For sure, most Filipino leaders, congressmen, senators and media people—just like most of their poor-country counterparts abroad—aren’t bothered by this issue.
But many in Western Europe, Russia, France, Japan, Korea and Singapore are beginning to listen to George Magnus.
Magnus’ latest book is The Age of Aging: How Demographics are Changing the Global Economy and Our World. [Published by John Wiley, October 2008, ISBN: 978-0-470-82291-3, hardcover. Price for the Philippines US$29.95.]
He tells us that for the first time in mankind’s history we have a situation of a rapidly aging population. There will be almost 2 billion people over 60 by 2050 or about 22 percent of the world population at that time. Today, people over 60 make up only 10 percent of the globe’s population.
There will be about 400 million 80-somethings by 2050, whereas there are only 88 million of them now.
Magnus describes the new social, political and economic problems this shift in age structure will cause.
An aging population has less people working to support those who are retired. There will not be enough caregivers. The social security pensions for the retired will go unpaid because there will be fewer new workers in the labor force to pay monthly contributions.
People over 65 in Japan and Italy were about 30 percent of the working-age population in 2005. In 2050 the over-65s will be at least 70 percent.
This means that in Japan now 3.4 persons are employed for every 1 person over 65. By 2050 the ratio will be 1.3 to 1.
This prospect terrifies the Japanese and the Koreans (who are fast entering the same boat as Japan and worried that they will end up having a 1 to 1 ratio before long.)
Western Europe, Magnus tells us, now has a 4 to 1 ratio—which is already a problem. France is trying to reverse the trend by subsidizing mothers and childbearing costs and may be succeeding. But Europe as a whole is at a standstill.
Not only the richer and technologically advanced countries have this demographic problem. Even China, whose family planning program has been as successful as Europe’s, is descending to the Japan-Europe level. China’s ratio today is 9.2 to 1; in 2050 it will be 2.5 to 1. –Rene Q. Bas, Manila Times