Philip Coggan is the Buttonwood columnist of The Economist. Previously he founded the "Short View" column and wrote the "Long View" and "Last Word" columns at the Financial Times. In the presentation he explores current issues with the eurozone. The “Investment Strategy 2013: Peering into the Crystal Ball” event was organised by The Pensions Management Institute and London Business School’s Alumni Club. It took place on 8 October 2012.

1. The outlook for 2013 and beyond
Philip Coggan, Buttonwood columnist

2. Europe: four problems
Too much debt
Too much owed to foreigners
Too big a deficit
Too uncompetitive

3. Too much debt

4. Too big deficits

5. Too much owed to foreigners

6. Not competitive, part 1

7. Not competitive part 2

8. Adding the totals
Combined ranking (low is bad, high is
good)
Greece 10
Italy 21
Portugal 21
Ireland 23
Spain 24
France 26
Germany 46

9. The long-term cycle
Money has two main functions
Medium of exchange
Store of value
Debtors emphasise the former,
creditors the latter
If creditors “fix” the value of money, via
gold standard or exchange rate,
debtors are overwhelmed

10. Expunging debt
Debt can be written off, inflated away or
devalued away
SOMEONE MUST LOSE
Problem with euro crisis is that they
have been slow to recognise this
Debt passed round system, like Queen
of spades in Old Maid
Germans must choose their poison

11. Here is the bill, Angela

12. Extend and pretend
Costs of exit are so large that
forbearance will keep being tried
New ECB programme; Britannia rules
the waves and the ECB waives the
rules
Money won’t be paid back but debt will
be endlessly extended
Not great for eurozone economy but not
catastrophic either

13. Long-term
Too much debt
US might grow its way out of it
But Europe has demographic problem
Number of workers per pensioner
Britain: 1970 4.3, 2010 3.6, 2050 2.4
Germany: 1970 4.1, 2010 3, 2050 1.6
Spain; 1970 5.6, 2010 3.7, 2050 1.5
Japan: 1970 8.6, 2010 2.6, 2050 1.2

14. So we must retire later
70 or bust
People in DC schemes already retire
one year later than DB
But two problems; DC not saving
enough
Public sector in DB
Battle between rich and poor, old and
young, taxpayers and public sector
workers, one country and another

15. Final thought
All pensions are claims on future
workers; can’t get round it
Catch two-and-twenty; May be some
niche sources of excess return but
everyone can’t get them
Basic return – economic growth and
risk-free rate. No inherent source of
return in, say, volatility