Do not Rely on the Government
Governments will become less and less important in the future. You should not rely on them for your income, either as an employee, or as a social security/pension recipient or as an investor in government bonds.
With unemployment set to go through the roof, and with disease becoming prevalent, the demand on government for expenditure will sky-rocket, just at the same time as government income will fall (with fewer workers paying albeit higher taxes).
Taxes deducted at source will increase, but governments will not have the resources to enforce ‘voluntary’ taxes.
The excess of expenditure over income can be paid for by printing money but this soon leads to inflation and hyperinflation, interest rates shooting up and increased government expenditure through interest payments on Government debt.
Alternatively, the Government can borrow to fund the difference, but there is a limit on how much people (and other countries, institutions etc.) will lend to the Government, approximately 160% of GDP (but much less for small developing countries, in the order of 60% or less). Governments will therefore default. For example, if a Government is running a deficit of 10% of GDP (excluding interest payments) and has a current public debt level of 80% of GDP, it will default in less than 8 years’ time. Taking the UK as an example, it has a debt level of about 80% of GDP and a deficit of about 3% of GDP, and hence will default in less than 27 year’s time, even in the unlikely event of no deterioration in public finances. In practice, of course, Governments try and understate their debt, for example by ignoring public sector pension deficits: UK true debt is more like 100% (with no deterioration in public finances, default in 20 years’ time).
Increasing unemployment levels will accelerate the trend towards Government bankruptcy. In the USA, for example, a 10% increase in unemployment rates from current levels (e.g. from 7% to 17%) will result in an annual increase in the Government deficit of about 4% of GDP, to 7% of GDP. In other countries, with higher unemployment benefits, the effects are worse. The UK is, with this level of unemployment, set to default in 9 years’ time.
At present, markets do factor in a relatively small probability of default in any given year, for the years after 2020, for example:
UK: 0.6% pa
Belgium: 1.2% pa
France: 1.4% pa
Germany: 0.6% pa
Ireland: 2% pa
Italy: 3% pa
Portugal: 4% pa
Spain: 3% pa
These are nothing like (by a factor of perhaps 10 times) the true probabilities and hence one should be selling long-dated government bonds. As ever, you give government £100 and you do not get £100 back.
The first countries to default will likely be the ones where credit default spreads are highest (see my article “Bank and Government Default Prospects” on my website For these countries, one should be selling their currency and assets and taking money offshore. There is a small but growing list of countries that will never recover and you can add these countries to the list. Italy, Portugal and Spain (see above) will happen later, and then you can add them to the list. From 2020 it will be the other countries to be added to the list.
Lack of effective government will be a good thing for these countries as free market forces will gradually take over. But, they will still have to contend with high unemployment (unemployable currently young people), widespread disease (as discussed in my articles on Type II diabetes and Fibromyalgia) and natural disasters.
All your assets should be transferred to the UK as soon as possible.