Why The Next Recession Will Morph Into A Decades Long Depressionary Event... Or Worse

Authored by Chris Hamilton via Econimica blog,

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.

But the change per 8 year periods of the 25-54yr/old population and total US full time employment turns out to be not so dissimilar.  In fact, it's a pretty nice correlation.

And so, since population growth means so much...two differing views on where this population is headed.  In red, the Census and in black, an unbiased view of growth based on the child bearing population, birth rates, and current and future immigration trends.

Why would I feel such confidence in a lowered estimate of growth?  Check the '08 Census projection for the 0-24yr/old US population through 2050 (blue line, chart below) and the massive downgrade of growth by the 2014 projection update (red line).  And it is still far too optimistic and the upcoming projection update will only further downgrade upcoming population growth, based on the ongoing declining birth rates combined with huge declines in illegal immigration since '09.

But if we widen out to the 15-64yr/old population vs. US full time employees...the chart below details both sets.

Taking a look at the annual 15-64 population growth should be pretty telling.  2008 wasn't a debt crisis...it was an end of an atypical period of abnormally high growth which so many had assumed was in fact "normal".

The chart below taking the 8 year changes in the wider 15-64yr/old US population vs. full time employment.

Charting the change in the core population of the US vs. full time employment.  During each downturn in full time employment, the growth in the core population continued and eventually pulled the business cycle to a fresh start.  However, as the population cycle slowed the downturns were deeper and recoveries slower due to minimal growth in demand from the population cycle.

Below, focusing from the turn of the century 'til now, the downtrend of core population growth is very plain and the negative impact on the business cycle should also be easily understood.  The expected Federal Reserve response is of course interest rate cuts to incent record quantities of new debt...to maintain the unsustainable present.  The next economic downturn will see no buoying impact of the core population growth to exit the downturn.

Anyway, the chart above makes it plain that the population cycle of the broad core of the US (and in fact, that of the 0-64yr/old population) is now on the precipice of turning Japanese...also known as depopulating (see chart below).

The next business cycle recession will be unending and is very likely to run years into decades and perhaps a century or more.  A declining population already indebted with record debt and zero interest rates will consume less...meaning overcapacity and excess inventories will never be fully cleared before the next downturn...and on and on and on.

But the absence of a growing consumer base isn't just a US issue...this is a global problem.  The annual growth of the 0-64yr/old population of the combined OECD nations (most the EU, US, Canada, Mexico, Chile, Japan, S. Korea, Australia / New Zealand) plus China, Brazil, and Russia show the growth that has driven nearly all economic growth has come to an end...and begins declining from here on.  And when importers are shrinking, exporters have no one to export to...and on and on and on.  A recent article helps to detail the depopulation we are now facing...not simply a demographic issue that so many believe, HERE.

The end of growth is the start of the SHTF scenario in which we now find ourselves.  While this situation offers short term nirvana to investors, the economic repercussions are ultimately disastrous.


El Vaquero Banana Republican Sat, 06/24/2017 - 11:35 Permalink

And this gets to the heart of why there is a very good chance that we are headed towards civil war.  We have a financial system that requires perpetual exponential growth, which has been replaced by fraudulent growth, and a population that has been promised a bunch of shit that it's not going to get based on that system.  Slap whatever ideology you want on it, antifa vs fascists, liberty vs tyranny, etc...  In the end, it will be people fighting over the scraps.  Those of you who are able and willing to cut your losses from all of the shit that you've paid into the system will be better off than most when the time comes.  

In reply to by Banana Republican

jeff montanye JamesBond Sun, 06/25/2017 - 04:40 Permalink

while those of the compound interest/debt peonage/accelerating earnings per share persuasion will be knocked unconscious or worse, the coming human population decline will have many benefits for the planet and the average worker, the latter of which will benefit from becoming rarer vs. robots.remember that the greatest improvement in the real wages of workers in the west, at least until the exploitation of fossil fuels, was brought by the black death.

In reply to by JamesBond

CheapBastard MrSteve Sat, 06/24/2017 - 13:27 Permalink

One of the best demographic map I know of (from UV):  
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In reply to by MrSteve

SDShack Cognitive Dissonance Sat, 06/24/2017 - 18:12 Permalink

Capital Controls is right. MyRA was not an accident. 0zer0care is destroying Medicare/Medicaid, as well as private insurance. Pensions are an unfunded Ponzi. Social Security funding has gone negative. Wage growth is flat at best. Interest rates are near zero so retirement portfolios have to invest in the manipulated stock market to have any ROI. Welfare/SNAP payments have never been higher. Every fucking govt safety net program has morphed into making the sheeple completely dependent on govt handouts just to survive. Any growth is only the result of taking on debt, which only empowers bankers.The nexus is TPTB will engineer the next crash in one fell swoop just like 2008, but it will have to be 100x worse then 2008 to scare the entire world into the New Feudal World Order. There is a reason why war drums are beating all over the world against the backdrop of nationalism, social and racial unrest, and economic and financial collapse. The fear index of the sheeple will have to be at infinity so the "solution" can be 100x bigger then TARP, so they can roll up Social Security, Govt. Healthcare, Pension, IRA/401K, and Welfare into the Ultimate Govt Control Savior Complex. Serfs is what they want, and they will never stop until they get it.

In reply to by Cognitive Dissonance

shovelhead Krungle Sun, 06/25/2017 - 08:25 Permalink

Phonecians once ruled the known world through trade.What happened?Bankers think they rule the world now with debt. They forget that sometimes people change the rules in their favor and quit playing.That big foreclosure in NYC? The guy who "bought" the floor is still alive. The Apartment and the building is still there, so what died?The debt. Poof! the property gets auctioned off at half the 'value' and that 'wealth' returns back to the air it came from.Ashes to ashes. We're gonna see a lot more of that.

In reply to by Krungle

fattail Krungle Sun, 06/25/2017 - 09:27 Permalink

Computer modeling and AI were not part of those previous attempts.  People are not as clever as they imagine themselves to be, but they no longer need to be clever.  Logic machines will take care of that.Run the simulations through Watson and see what happens.  He'll tell you to start WWIII.

In reply to by Krungle

Oldwood SDShack Sun, 06/25/2017 - 08:48 Permalink

If we are to assume that this economic mess is deliberate, then we must assume also that these collapse convulsions are designed to create panic that grants them even more control. For this reason I do not think they will precipitate a world ending collapse. Too many are anticipating it, prepping (such as we can). Rather than inciting massive unrest that could be a threat, they can instead simply starve us out, one person at a time...they already are. Those of us resisting, excluding ourselves from their "markets" have paid dearly thus far, while we insist (daily) that the end is near (for damned good cause).There is no response that is not a desired response. They have created the game board and own the game pieces that we claim as our own. Every move we make is anticipated, but we are deluded in believing that our moves are in contradiction to THEIR interests. Their game is a long one while ours are short, even though we think we are long because so much of modernity appears nearly instant.All we have is what we have always had, the pursuit of individual personal satisfaction. The challenge to that happiness is to have awareness of our threats without paralyzing paranoia.For me, this analysis, my "prepping", has become my hobby and provides some perverted joy that most around me cannot understand. When I expose them to my thoughts, my analysis of this world, they recoil in horror assuming these "dark thoughts" are some incredibly destructive and depressive burden. They are not. I feel like the one eyed man in the land of the blind.The question is whether we can still enjoy eating the steak when we KNOW it is not real.

In reply to by SDShack

chunga fattail Sun, 06/25/2017 - 09:59 Permalink

Lovey has the discipline to ignore all this stuff and calls everything fake news. She tells me I should ignore it too because there isn't anything we can do about it.We recorded a documentary film called "American Standoff" that went into detail what happened to the Hammonds, LaVoy Finicum. It's very good and we watched it twice. Both times she was crying at the end when Mrs. Hammond says she still loves her country but sure wished someone could fix it.I told her that's why I can't ignore this.

In reply to by fattail

El Vaquero Rusty Shorts Sat, 06/24/2017 - 12:36 Permalink

Their system is wobbling and could go boom at any time.  I don't think they're wanting a civil war.  I think they're thinking about maintaining their status.  Start crunching the numbers, and you'll find that they cannot withstand a full scale uprising.  It is my understanding that there are 350,000,000 private firearms in the US.  To put that in perspective, there are around 65,000,000 soldiers, reservists and mercenaries on the entire planet.   You can argue that they have jets and tanks and whatnot, but they're still outmatched.  For starters, probably half the military would defect, with their equipment, and a lot of LEOs would either defect or stay home.  But that's not the biggest issue.  Assume that none defect, and they're still going to have massive supply chain issues.  If it's not the cause of a civil war, a civil war would crash the USD, and hard.  That means no more cheap Chinese shit coming in to be exchanged for FRNs, and more importantly, that 3-5 million barrels of crude oil and crude products that we import goes away.  That has major implications for things like agriculture and shipping.  Modern supply chains are exceedingly complex.  They will break.   I'm not trying to make any statement on the ecological consequences about supply chains here, just trying to provide a demonstration of how complex they can be.  The following is for fucking catsup:

Just how energy inefficient the food system is can be seen in the crazy case of the Swedish tomato ketchup. Researchers at the Swedish Institute for Food and Biotechnology analysed the production of tomato ketchup (2). The study considered the production of inputs to agriculture, tomato cultivation and conversion to tomato paste (in Italy), the processing and packaging of the paste and other ingredients into tomato ketchup in Sweden and the retail and storage of the final product. All this involved more than 52 transport and process stages.The aseptic bags used to package the tomato paste were produced in the Netherlands and transported to Italy to be filled, placed in steel barrels, and then moved to Sweden. The five layered, red bottles were either produced in the UK or Sweden with materials form Japan, Italy, Belgium, the USA and Denmark. The polypropylene (PP) screw-cap of the bottle and plug, made from low density polyethylene (LDPE), was produced in Denmark and transported to Sweden. Additionally, LDPE shrink-film and corrugated cardboard were used to distribute the final product. Labels, glue and ink were not included in the analysis.http://www.321energy.com/editorials/church/church040205.html

Like I say, that's just catsup.  Apache attack helicopters are maintenance hogs like you wouldn't believe.  I have zero interests in taking one on toe to toe, but they cost a fortune to run.  I also guarantee that the supply chains for their parts are a helluva lot more complex than some Swedish catsup.  They'll break, and a lot of the US's technological superweapons go away.   The US also cannot bomb out its citizens on a large scale.  Bombing of the cities means that, you guessed it, it cuts its own supply chains for the MIC.  If a rebellion were to cut the cities off from basic necessities, bombing the rural folks is a real threat to agriculture.  We, The People are the tax donkeys, the debt surfs to be fleeced, and whether they realize it or not, their system depends on us.  Some of us depend on their system because we know no better or because we want to be taken care of, but some of us depend on their system because it is illegal to not do so. The best case scenario for the elites who don't jet down to New Zealand in the event of a full scale uprising is a lose-lose situation.  Collapse.   And I'm not advocating for a civil war here.  You have to understand that, if we went full tilt against the deep state and those calling the shots, the potential exists to break supply chains so completely that tens of millions would die from disease and starvation alone.  This wasn't true 100 years ago when the country was much more rural, but today, we are an urban society where most people have no clue where their food, fiber or medicine come from.  But whether or not I advocate for or against it has little bearing on whether or not it will happen, and I tend to think that it is likely.  So, keep in mind what the worst case scenario is for everybody in the event that it happens and build up your own little corner of resilience.  

In reply to by Rusty Shorts

chubbar El Vaquero Sat, 06/24/2017 - 12:47 Permalink

Good recap! Also don't forget that those countries folks may be fleeing too aren't self sufficient either. Supply chains that they need to have operating for their society to remain functioning will become disrupted and that will ripple around the world. I can assure you that all these countries that are now supplying the "chain" will not do well when they can no longer sell to the US or whomever, if that country is in a civil war. Plus, all those countries are also teetering on collapse with this monetary ponzi scheme. It won't take much to push the whole world into collapse.

In reply to by El Vaquero

Hugh_Jorgan El Vaquero Sat, 06/24/2017 - 15:43 Permalink

I agree with much of your analysis and hope that your argument is indeed valid.However, I have to think that the MIC is a bit more discriminating as to where and how it's supply chains are built and maintained and what inventories are kept (both on and off the books) than the Europeans making gourmet catsup. If I was an MIC analyst I would try to make sure that as much of these supply chains could be preserved (or interrution effects mitigated) as possible in the event of an uprising. Thus, contingency planning would allow for devastating attacks within design parameters that would keep them from damaging their ability to fight with the advantages they currently possess.The other aspect to this flaw I see is one of time. If a conflict were to drag on for decades, I would agree with you 100%. But, if an uprising was quelled quickly enough with overwhelming force, it might not matter that supply chains were damaged/interrupted temporarily because they could be repaired before the effects caused them to abandon their technology advantage.

In reply to by El Vaquero

fbazzrea Hugh_Jorgan Sat, 06/24/2017 - 16:16 Permalink

how could a govt hope to rule a people seeking liberty by responding with "overwhelming force"? other nations would come to the aid of American patriots. it's one thing for a tyrannical govt to respond to individual acts of rebellion via militarized law enforcement, but to outright war against your own citizens will only hasten their defeat, American military generals flipping aside. imo

In reply to by Hugh_Jorgan

BuckWild Hugh_Jorgan Sat, 06/24/2017 - 19:05 Permalink

Just like Vietnam, Korea, Somalia, Iraq, Iran, Afghanistan....... They will kill a bunch of people they will destroy a bunch of property, But they never win the peoples hearts.They will never suppress the American Patriot! They don't have enough war material to even conquer Texas!  Name one country where they finished the job and made a bad country become a Republic that followed American principals. Has not happened wont happen. Not to mention you are talking about American Citizen soldiers... You think they will kill their families.... Until the UN has an Army of Chinese soldiers its not even going to be started. That will happen and when it does you better hope you can speak Mandarin!

In reply to by Hugh_Jorgan

fattail BuckWild Sun, 06/25/2017 - 09:37 Permalink

A bunch of poorly trained, chain smoking, chinese soldiers sent to a foreign country with the best armed and trained civilian population of all time.  Not going to happen.  Chinese are not that stupid.  TPTB will use predator drones and AI guns to control the population.  You should get out of the cities now.

In reply to by BuckWild

canisdirus Hugh_Jorgan Sun, 06/25/2017 - 13:33 Permalink

Having worked in the MIC for years (hey, it's a stable job with good pay/benefits), I can assure you that they do not have a resilient supply chain. Almost everything we built used commercial components purchased from the exact same suppliers that every other company uses. These components are almost exclusively made in SE Asia, we just assemble them here. JIT "Lean" manufacturing techniques mean most companies don't have more on hand than they need for a production run or two of anything that isn't exceptionally common. If that complex supply chain breaks, it'll become exceedingly difficult to replace or maintain the equipment.

The scary thing about an East Asian war is that in the last world war we had the entire supply chain in most countries and a peaceful location like the US couldn't just get cut off from their sources. In our civil war most states had entire supply chains for arms all within their borders. I don't think that any company can claim that anymore, even those that haven't fully embraced JIT supply chain management.

In reply to by Hugh_Jorgan

Åristotle El Vaquero Sat, 06/24/2017 - 20:18 Permalink

"Start crunching the numbers, and you'll find that they cannot withstand a full scale uprising"

Equality consists in the same treatment for similar persons, and no government can stand which is not founded upon justice. For if the government is unjust everyone in the country unites with the governed in the desire to have a revolution, and it is an impossibility that the members of the government can be so numerous as to be stronger than all their enemies put together. —1332b27

In reply to by El Vaquero