Posted on 11/03/2017 9:10:51 AM PDT by SeekAndFind
The world economy is premised on a ludicrous idea - that Asia, then India, and then Africa will continue to drive economic growth.
So as not to turn this article into a book, lets consider this idea focusing on East Asia consisting of China, Japan, North and South Korea, Taiwan, and minor others. This region consists of 1.6 billion persons or about 22% of earths inhabitants. However, since 2008, it is this region that is responsible for nearly 100% of the global increase in demand for oil (best proxy available for true economic growth) and having primarily driven global economic growth. My point in this article is that the growth in this region is entirely a credit driven supernova against collapsing populations which will never be able to fill the 100+ million newly added apartments or pay back the debt incurred to achieve the "growth". Contrarily, from an investor standpoint, this weakness is the green light to "invest" as aggressively as possible because as long as central banks exist, they have your back.
Consider, since 2000, China's debt outstanding has risen something like 14x's to 17x's or from about $2 trillion to something between $30 to $35 trillion presently. As for Japan, who knows Japan's true debt as Japan's central bank is buying much or most of the debt and essentially throwing it in a black hole, never to be seen again(...monetization with a capital "M").
Why the massive debt creation and central bank monetization? Depopulation with a capital "D". First off, consider the collapse in fertility rates for these nations (chart below). To maintain a constant, zero growth population, the childbearing population needs to produce 2.1 children in order to replace themselves (dashed line, below). However, as the chart below shows, E. Asian nations have seen negative fertility rates for decades (Japan turning negative in '74, S. Korea in '83, China in '92, and N. Korea in '96).
Looking at the fertility rates from 2000 (chart below), some minor rises in fertility rates have been noticed in China since '00 and since '05 in Japan and S. Korea. However, despite the minor upticks, all nations remain solidly negative and well below the 2.1 zero decline threshold.
For those expecting East Asia to continue driving global economic growth, I have a very big problem for you. East Asia is in the midst of a population collapse. The East Asian childbearing population, after rising by 366 million or +125% from 1950 until peaking in 2005, is now collapsing nearly as fast. By 2030, those of childbearing age will have fallen by 180 million or a 27% decline (chart below). By 2050, a clean halving of the childbearing population is likely.
So, the size of the childbearing population is back where it was in 1980 and by 2050 will be almost back to its 1960 size...but hypercritically, that population in 1960 was having approximately 5 children per family versus the 2020 or 2050 versions having somewhere around 1.6. It is unlikely anything can be done to stop the depopulation daisy chain in East Asia and the economic collapse is already assured. The collapse in demand against record quantities of assets is a mismatch for the ages...but of course central banks will continue to step in and monetize as long as possible.
As for the rest of the population, the growth among the heart of the regions economy, the 20 to 65 year olds, peaked in 1990 and has now indefinitely turned negative (falling something like 12 million from 2015 to 2020...and hundreds of millions fewer consumers, home buyers, tax payers by 2050). Even the growth among the 65+ year old cadre will peak about 2035 before beginning to rapidly decelerate (change per five year periods, chart below).
Lastly, even growth among the old will be shifting to the very oldest as the bulk (and then the entirety) of the growth will be among the 75+ year olds (change per five year periods, chart below).
As for investors, this is your last and greatest chance. The depopulation issue is not confined within East Asia. The chart below shows the diving global fertility rate falling by more than 50% since peak fertility in the mid 1960's.
It is a global phenomenon exhibited nearly everywhere but Sub-Saharan Africa. The chart below shows global fertility rates are universally collapsing and it is nearly solely Africa that continues the global population increases...at least for now.
Even India and/or the Middle East / North Africa (MENA) are likewise seeing collapsing fertility rates. India's fertility rate is almost sure to be negative by 2020. There truly are no green shoots from a population growth perspective.
Central bankers will continue to "fake it" until they "make it". Obviously, they never will "make it" but a select few will get absolutely rich beyond belief from central banker "efforts" as they continue to "fake it" as long as possible. So, invest accordingly.
Well, if the Asian giants really start to run out of people, they can import Muslims and sub-Saharan Africans, and all will be well. Angela Merkel can fill them in on the details.
Regardless, if there are fewer people then if each person buys more crap then the pyramid can be maintained.
Going forward, if the world population does level out we will see even greater attempts to get people to surround themselves with pricier crap.
Paul Ehrlich would be pleased. Wrong like he was on just about all of his predictions, massive global cooling for example, but pleased.
Well, crony capitalism certainly does - that's why our elites' priorities are "all immigration - all the time." Just get the potential consumers and taxpayers in the door, and never mind who they are or where they came from.
This guy is postulating exactly the opposite of Ehrlich. Ehrlich’s main premise was that more people would result in resources becoming more scarce, fueling economic disruptions, famines, conflicts, etc. Most credible economists recognized the long discredited ghost of Malthus rattling his chains and predicted (correctly) that substitute and complementary products, as well as technological advances would mitigate shortages.
What this writer is postulates (and if you plumb some of the heavier macro-economics out there, he is not alone) is just the opposite; that an aging and eventually declining population will result in less economic activity. It is an interesting idea. Economists have long held as a given that people have economic value, both as producers and consumers. And we have been in a rising population environment for so long that it is practically a given that number of people worldwide will increase over time. This is one factor that makes some inflation not just acceptable, but desirable in a lot of macro-economic schools of thought. This article poses the thought that deflation is inevitable, absent artificially created liquidity. If we look at what has gone with the debt and interest rates in the last 10 years it matches up with his premise.
He may be jumping the gun a little bit; my own thoughts are that automation and increasingly able “smart” technologies (such as self-driving cars and robotics) will have a larger economic impact in the shorter term than demographics. For 50 somethings like me, our remaining years will probably not be too different from what we expected our life cycles to be 30 years ago. I suspect that my 21 year old son will approach “retirement age” in much different world, with fewer young people around, a world wide population skewed to mostly over 50 geezers that has in numerical aggregate been unchanged or somewhat declining since 2030, and most “work” being done by robots.
The muzzies will fill the gap....with free welfare here and in Europe....they will continue to breed like rabbits....not to mention the Mexicans, Central & South Americans...
bkmk
In short, the ZPG enthusiasts got what they wanted but it wasn't what they wanted, which happens a lot with utopian social activists.
I would question the author's statement that the world economy is predicated on the assumption of infinite growth - such a general concept as world economy isn't "premised" on anything at all, it simply is; nobody built this beast deliberately, we're all just trying to ride it, some with greater success than others. Certain Globalism enthusiasts appear to be making the same mistake the ZPG people did in assuming that distribution is the challenge: so we have empty apartment buildings in China and a teeming population in sub-Saharan Africa? Well, just move the latter into the former! Magic happens...well, no it doesn't, as certain Germans hoping to bolster a fading tax base with foreign workers are finding out. It's way more complicated than that.
The actual distribution of population decline among the wealthier nations doesn't offer much of a clue as to why it's happening, although theories abound. Whether there's anything we could, or should do about it is one question.
I’m saying that Erhlick would be pleased because world overpopulation is slowing, he predicted catastrophic events happening because of overpopulation.
Look at the MENA (Middle East/North Africa) numbers and you will realize that Muslims are not having as many children as you may think. More than Europeans, certainly, but not anywhere near the rate seen 30 years ago. They rebounded slightly in the years since the Arab Spring, but I would expect that if we can defeat the Islamists that rose to power under Obama and the general Islamization that grew under Clinton and Bush they will go back to a falling trend. The smack down of ISIS could be a catalyst for rolling them back.
The massive decline of world fertility and population without a major natural disaster like plague or ice age is unprecedented and not exactly a good thing for our grandchildren.
Ahh, I misinterpreted your original comment. My apologies.
Prosperity usually encourages a reduction in birth rates. Selfishness or what?
Thanks for posting. It is quite provocative.
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