Tag Archives: Population growth

Deflation Threat Looms As China Suffers First Population Decline Since 1949, by Tyler Durden

China will not grow at anywhere the rate it has been if its population is shrinking. From Tyler Durden at zerohedge.com:

China is battling not one but three vicious demons. The interconnected issues of insurmountable debts, deflation, and demographics threaten to sap the world’s future growth potential. 

Fending off the 3 D’s: debts, deflation, and demographics requires the People’s Bank of China to slash borrowing costs and unleash an enormous amount of credit into the local economy to cover up the faltering demand that usually persists with demographic challenges.

The question we should be asking is China really on the “rise,” as President Xi Jinping believes: “the East is rising and the West is declining” or if the coming demographic crisis derails Xi’s global takeover plans.

Beijing desperately attempts to recover from its decades of disastrous ‘one-child policy,’ which officially ended in 2015 and was replaced by the current two-child policy.

According to FT’s sources, the latest Chinese census data, which was completed in December and has yet to be publicly released (the issue is reportedly so sensitive that it won’t be released until many government agencies reach a consensus on the data and its consequences), is expected to show the country’s first population decline since records began in 1949.

China’s total population is expected to print less than 1.4 billion, according to people familiar with the census report, and if it is reported, the peak in China’s population came five years earlier than the United Nations predicted.

But, as Bloomberg notes, the trend is hardly surprising. China’s birth rate has been in decline for years and the introduction of the two-child policy in 2016 failed to make a dent. The number of newborns in 2019 fell to 14.65 million, a decrease of 580,000 from the year before. To cope with the shrinking population, a PBOC study last month urged a drastic overhaul of the policy to encourage “three or more” children per household. It called for a total lifting of any restrictions to “fully liberalize and encourage childbirth” to reverse the current four-year straight decline in births nationwide.

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The Population Collapse Behind Interest Rates, Debt, & The Asset Price Explosion, by Chris Hamilton

It’s demographically baked into the cake that the population growth rates that have propelled so much economic growth will fall precipitously. From Chris Hamilton at economica.blogspot.com:

This may not be a surprise to many males, but human females are unlike the rest of the animals on earth.  Human females have a unique and totally differentiating factor from nearly all other animal life; their bodies cease being capable of pregnancy approximately half way through their life cycle.  This natural change to sterility (menopause) does not happen in the animal kingdom (nor in human males) essentially so long as they live (ok, actually there may be a couple of whales and porpoises that may also go through menopause…but I digress).  Animals and male humans are still able to reproduce nearly until the end.  But not human females.  Even before menopause fully takes over, typically around 50 years of age, fertility rates drop radically after 40 and miscarriages surge among those able to get pregnant.  By 45, pregnancies essentially cease.

What the hell does this have to do with economics, you may be asking yourself? Judging the size and change of humankinds population is quite different than any other species on earth because of this truncated period of fertility among human females. Thus, to gauge the direction of our species, and the future consumption and potential economic activity, we must focus on annual births versus the 20 to 40 year-old female population and understand that the post childbearing, 40+ year-old female population is, from a fertility perspective, simply an inert echo chamber. The 20 to 40 and 40+ year-old populations shown below through 2040 are not estimates or projections but actual persons which already exist and (absent some pandemic, world war, or change in life spans) will slide through the next 20 years.  All data (except where noted) comes from the UN World Population Prospects 2019 and they collect / compile all the data from the national and regional bodies.  The only real variables in what I’ll show below are immigration, deaths, and births over the next 20 years.  I also primarily focus on the world excluding Africa.  Africa consumes so little, has relatively very low emigration rates, is highly reliant on the rest of the world for it’s economic growth, but from a population perspective, is growing so rapidly as to skew the picture.

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The Federal Reserve and Trump Intent on “Squeezing Blood from a Turnip”…Or Why Most Americans Are in a No Win Scenario, by Chris Hamilton

Economica has some great charts. This batch shows that America’s debt is climbing relative to its ability to service it. From Chris Hamilton at economica.blogspot.com:

According to conventional economic wisdom, growth is the increase in the capacity and production of goods and services, compared from one period to another.  This view deems that the greater the growth in capacity and utilization of that capacity, the greater the economic growth.  Strangely, what this school of thought fails to account for is the basis of the US consumer economy…the quantity of growth among the US population (aka, consumers)?  Or how a population growing ever more slowly can consume a capacity that (thanks primarily to innovation, technology, and ever cheaper and greater debt) is allowing for ever greater production?

The chart below shows three variables from 1790 to present;

  1. Columns are US debt to GDP
  2. Black line is annual total US population growth (%)
  3. Yellow line is annual under 65yr/old US population growth (%)
Given the US is a nation of immigrants, the US has had a naturally high rate of population growth due to this net inflow of immigrants.  However, annual population growth has consistently decelerated from an annual growth rate of 3.1% in 1790 to just 0.6% in 2017 (an 80% deceleration, with all growth now dependent on immigration).  The substitution of more and cheaper debt (likewise corporately and personally) to maintain an unnaturally high rate of economic growth while population growth decelerated is plain.  Also noteworthy is the abandonment of the Bretton Woods agreement in 1971 and the simultaneous shift from net exporter to net importer at progressively higher levels.  ***BTW, the sharp waterfall in population growth in 1918 was tied to the global H1N1 influenza pandemic.
However, gauging potential growth by the under 65yr/old population (yellow line in above chart), the organic basis of growth has nearly ceased (a 95% deceleration).  Why is the lack of under 65yr/old growth important?  Only this population is capable of child birth, this population makes up 90%+ of the work force, and this population (at its peak in earnings from 45 to 55yrs/old) earns and spends double the average 75+yr/old.  It is the under 65 population that utilizes credit while 65+yr/olds are credit averse (for good reason).  This is the segment that traditionally drives the economy but is now absent…and ever more and cheaper debt is the sad substitute.

One Day Soon, The Sun Will Not Rise, by Chris Hamilton

The Econimica blog has a lot of great graphs, and it usually has a different perspective than everyone else. From Chris Hamilton at econimica.blogspot.com:

When the Q4 US resident population data is released, something that has not happened in the post WWII era will take place.   The population of adults aged 15-64 years old will decline.  This was not supposed to happen and will put an end to seven plus decades of continuous population growth which has meant a growing workforce, a growing consumer base, and growing tax base.  A growing core US population, something considered as sacrosanct as the sun rising, will not happen.  On a year over year basis, where there once were up to 3 million more homebuyers than the previous year, 3 million more car buyers than the year before, 3 million more potential customers…there will be likely be thousands fewer.

Many will assume this is a demographic issue of boomers exiting the working age population…but actually demographics is simply the early onset of a disease that will only progressively worsen.  This is truly a population growth issue, not simply a demographic distribution problem.

The economic system the US and world have adopted are dependent on perpetual growth on a quarter over quarter and year over year basis.  Two negative quarters (or even zero growth) and a recession is called and all the Federal Reserve’s and federal governments tools are employed.

Given the importance of growth, the most important factor in growing the economy is the rising demand represented by a growing population.  But the US fertility rate has been negative for 45 years (chart below) meaning the native population (plus immigrants) have continually failed to replace themselves.

This means US population growth has simply been a story of immigration.  And until 2000, N. America was the primary destination for the majority of the world’s immigrants.  However, since ’00 and particularly since ’05, the migration patterns have significantly changed.

To continue reading: One Day Soon, The Sun Will Not Rise

Why The Next Recession Will Morph into a Decades Long Depressionary Event…Or Worse, by Chris Hamilton

One critical, but often overlooked, factor in macroeconomic analysis is population trends. From Chris Hamilton at economica.blogspot.com:

Economists spend inordinate time gauging the business cycle that they believe drives the US economy.  However, the real engine running in the background (and nearly entirely forgotten) is the population cycle.  The positive population cycle is such a long running macro trend thousands of years in the offing that it’s taken for granted.  It is wrongly assumed that upon every business cycle downturn, accommodative monetary and fiscal policies will ultimately spur greater demand and restart the business cycle once the excess capacity and inventories are drawn down.  However, I contend that the population cycle has been the primary factor in ending each recession…and this most macro of cycles is now rolling over.  Without this, America (nor the world) will truly emerge from the next recession…instead it will morph into an unending downward cycle of partial recoveries…contrary to all contemporary human experience.

The evidence for my contention begins with the 25-54yr/old US population, which peaked in December 2007 and remains below that peak ever since (this population is presently about 400k fewer than Dec of ’07).  However, total US full time employment is now 3.6 million above the previous peak in 2007.  This 25-54 to FT employment relationship is now 1:1…just as it was in 1980 and 1970.

Annual change in 25-54yr/old US population vs. annual change in total full time US employees (below).  The macro population cycle provided millions of new adults (consumers) and their increased demand restarted the more frequent gyrations of the micro business cycles…until 2008 and again now in 2017.  Some may take note that the Federal Reserve cost of money (the Federal Funds Rate in blue) generally followed the population cycle, only making some deviations for the business cycle along the way.