Tag Archives: demographics

Why The World Economy Is Likely To Collapse (In 1 Simple Chart), by Chris Hamilton

Posted on January 25, 2017 | Leave a comment

You may be tired of SLL’s obsession with the debt and demographic tsunami, but like a real tsunami, this one is going to make landfall; in fact, it already has. This article is good for visual learners. From Christ Hamilton at economica.blogspot.com:

No difficult economic terms, no tough charts, just simple math.

1 – The worlds population of under 40 year olds (excluding Africa) has essentially peaked (chart below…bars represent 0-40yr/old population, dashed lines UN future estimates). What is interesting about the under 40 year old population is that they are responsible for about 97% of all pregnancies / births. It’s not impossible for 40+ year old women to have children, just statistically very rare (particularly outside the developed world).

Ok, we’ve established the global under 40 population (excluding Africa) has essentially peaked…now we lay out the chart below that a shrinking population (above) isn’t replacing themselves. Chart below shows world fertility rates, again breaking world fertility (ex-Africa) from the African fertility rate. The world (ex-Africa) has fallen below the 2.1 births per female replacement level…and even Africa is rapidly slowing.

A flat to shrinking child bearing population that is not reproducing at a rate to replace themselves and the fertility rates continue to fall. This all points to the potential the low UN 0-40yr/old population estimate could be fairly accurate (chart 1, lower bound). With either the medium or low estimate, the UN is telling us they expect a massive depopulation of under 40 year olds world-over. Somewhere between 1 billion to 2.5 billion fewer under 40yr/olds by the turn of the century & perhaps well in excess of a 50% decline (except for Africa?!?). I lay out why the Ex-Africa approach to viewing global economics makes sense, HERE.

To continue reading: Why The World Economy Is Likely To Collapse (In 1 Simple Chart)

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China Is the Biggest Short…Ever, by Chris Hamilton

Posted on June 2, 2016 | Leave a comment

China’s got the same demographic problems that are afflicting the rest of the developed world (see previous article). From Chris Hamilton at wolfstreet.com:

Over the next 2 decades, there will be an average of 7.5 million fewer 0-55yr/old Chinese every year vs. an average annual increase of 9.5 million 55+yr/olds. And the wealthy minority of the elderly have stashed their reserves in a whole lot of expensive, vacant real estate that they intend to pass along (rent or sell) to the declining young population. What could go wrong since housing prices only go up…right!?!

China, a story of a massive population and population growth. As the adult population growth began to wane, debt was substituted for the waning growth. Population growth turned to outright depopulation among the young, while all remaining population growth was among the “pig through the python” elderly.

But as the Chinese gained wealth, (particularly among the wealthy of the tier 1 & tier 2 cities), the wealthy soon to be elderly didn’t trust banks or the stock market. Instead they piled their savings primarily into real estate. The top quintile of Chinese purchased the bulk of the new speculative inventory of high-end housing, typically buying multiple apartments and condos.

The vacancy rate among the housing segment in these cities is supposedly in excess of 20% (compared to a peak of 3% during the US subprime crisis). There are roughly 500 million households in China and best guestimates suggest that there are 50 million or so vacant housing units…or 10% of the national housing stock.

To put this in perspective, I’ll compare it to the US subprime crisis…a crisis that was likewise triggered by the demographic deceleration of population growth. But still, despite decelerating in the US, there was (and still is some growth…see below). The Fed was determined to use (ok, abuse) interest rate cuts as a substitute for decelerating population growth among adults. The chart below outlines the decelerating 20-64yr/old annual population growth through 2025 (this includes all permanent residents…legal or otherwise).

And on a percentage basis (below), the declining growth among the adult population correlated to the Federal Funds rate and federal debt. The introduction of nothing down, NINJA and liar loans was simply because there was a collapsing number of potential buyers to support a speculative bubble, particularly in the “tier 1” US cities and locations.

To continue reading: China Is the Biggest Short…Ever

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China’s Population Decline Dooms the Transition to Consumer Economy, by Chris Hamilton

Posted on May 7, 2016 | Leave a comment

Demographics are often econonomic destiny. China’s demographics are ugly. From Chris Hamilton at wolfstreet.com:

And yet, China’s total debt goes parabolic.

If a business could foresee that it would have a declining consumer base (declining number of total potential customers), that would likely be a pretty good reason for serious concern and significantly lower growth expectations. However, when it comes to China, the shrinkage of its under 65yr/old population and particularly of the 20-59yr/old population is somehow coinciding with the story of China transitioning from an export-based to a domestic consumption-based economy?

To wit, with a declining population, China will transition from exporter to consumer, while all those grown one-child-policy adults support their 65+ year-old parents, and still grow 6%-7% annually? Inquiring minds wonder how it’s possible a declining base of consumers would consume more.

In a word…CREDIT! And, the growth of credit in China has gone parabolic. It’s highly unsustainable and likely ruinous.

The Details:

Each bar in the chart below represents annual growth or decline of the Chinese adult population. The blue line is a 4 period moving average of the population change. From 1973 through 2008, an additional 12.5 million Chinese adults entered the Chinese economy every year. That meant 12.5 million more consumers, home buyers, car buyers, potential job seekers, etc.

But since 2008, annual population growth has decelerated by 95%. By 2017 or 2018, it will begin a long decline. Every year from 2018, the adult 20-59 year-old population of China will decline by millions for at least two decades and likely far longer. This is no forecast or “gloom-n-doom” fantasy, but simply counting the number of people born and tracking them through the population (plus, China has net emigration).

All this means the charts below likely show a best case scenario although the population data could be lower if greater emigration occurs or a higher mortality rate ensues due to illness, environmental, or global disturbances (aka, war).

To continue reading: China’s Population Decline Dooms the Transition to Consumer Economy

 

 

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Why This Sucker Is Going Down——The Case Of Japan’s Busted Bond Market, by David Stockman

Posted on March 8, 2016 | Leave a comment

From David Stockman at davidstockmanscontracorner.com:

The world financial system is booby-trapped with unprecedented anomalies, deformations and contradictions. It’s not remotely stable or safe at any speed, and most certainly not at the rate at which today’s robo-machines and fast money traders pivot, whirl, reverse and retrace.

Indeed, every day there are new ructions in the casino that warn investors to get out of harm’s way with all deliberate speed. And last night’s eruption in the Japanese bond market was a doozy.

The government of what can only be described as an old age colony sinking into certain bankruptcy sold 30-year bonds at an all-time low of 47 basis points. Let me clear here that we are talking about a record low not just for Japan but for the history of mankind.

To be sure, loaning any government 30-year money at 47 basis points is inherently a foolhardy proposition, but its just plain bonkers when it comes to Japan.

Here is its 30-year fiscal record in nutshell. Not withstanding years of chronic red ink and its recent 2014 consumption tax increase from 5% to 8%, Japan is still heading straight for fiscal oblivion. Last year (2015) it spent just under 100 trillion yen, but took in hardly 50 trillion yen of revenue, stacking the difference on its already debilitating mountain of public debt, which has now reached 240% of GDP.

To continue reading: Why This Sucker Is Going Down——The Case Of Japan’s Busted Bond Market

 

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We’re Doomed

Posted on December 23, 2014 | 2 comments

From Charles Hamilton, via Zero Hedge, via Biderman’s Money blog:

Demographics – Why The Great Recession Started (And Won’t End Anytime Soon)

WWII is still reshaping our economic reality. The massive global loss of life in WWII and its birth dearth during the war created a demographic hole (unusually high death / unusually low births over a 5 to 10 year period). The subsequent baby booms in the US and globally in Japan, Europe, and so many more locations which were affected by the war created a “pig in the python” moment. This unusually large wave of population growth from ’45-’55 was “pent up demand” from the war. Those of family rearing age who waited, those who remarried, and those who fretted…they rushed to make up for lost time over the decade after the wars conclusion. But the subsequent generations were in no such rush and in fact began an ongoing process of slowing the creation of families and children.

But society and its leaders assumed this baby boom anomaly to be the new reality. They built an entire economic system on the one decade anomaly. But that wasn’t enough. They had to layer the anomaly with the unsustainable and the previously immoral levels of usury (renamed and rebranded as leverage, credit) and economic policies only effective as the passing of the pig was imminent. The baby boom group or entity spanning 10 years will in 2015 turn a collective 60-70yrs old. The “pig is passing” from the American and global workforce into retirement and now the wreckage and folly of such basic misnomers has come home to roost…and will get far worse. Central bank and government actions to create the problems and subsequent responses should be seen for what they are…entirely self-serving and ineffective.

For the rest of Mr. Hamilton’s excellent article, a tightly reasoned, well-supported, and graphically illustrated argument why demographics are economic destiny, which means a bleak prognosis for most developed countries’ economies, follow the link. The article merits and rewards a careful reading.

http://www.zerohedge.com/news/2014-12-22/demographics-why-great-recession-started-and-wont-end-anytime-soon

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