The End Is Near... Depopulation Is Out Of Control... So Buy Stocks (Seriously)

Authored by Chris Hamilton via Econimica blog,

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.

Comments

AGuy THEBORG Fri, 11/03/2017 - 13:01 Permalink

". THe US medical system is the most expensive on planet earth and your average life expectancy ages are next to the lowest on planet earth!! PLease explain that"

Simple: Americans have very unhealthy lifestyles: overweight/Obese. Majority of Calories from Processed food. The reason why medical services are expensive is because Americans expect a pill to take care of they're bad habits. Add on massive fraud, excessive medical lawsuits. Turn on the TV and 1 in 3 commericials will be a lawyer asking people to call to sue medical companies, Doctors, Pharma.

To be honest its amazing its not double or triple the current costs! That said, I am sure medical costs will double in the next 5 years as Boomers age and need a boat load more medical services, and there will be fewer workers paying into the system (SS/Medicare/Medicaid/Health Ins.)

In reply to by THEBORG

AGuy Stuck on Zero Fri, 11/03/2017 - 15:10 Permalink

"$3200 to remove a splinter. $4900 for a sprained ankle. $292,000 for an improperly diagnosed appendix. $560 for a simple blood test. "

Yup, These are to subsized the costs of others. A lot of patients get deep discounts or never pay. Then there is the small army of clerks every doctor needs to handle all of the paper work: Filing Ins. Claims, medical Records. Then throw in MalPractice insurance, Licenses, Medical waste disposal, medical tests (to avoid malpractice lawsuits).

Most of the doctors that I know aren't rolling in cash. They afford upper middle class lifestyles. Plus most work long hours, have to deal with emergencies during the middle of the night.

"No. I don't think it's the average American's lifestyle"

Go to your local walmart and take a good look at your average american. See what they load those carts with, Its not fruits and veggies!

In reply to by Stuck on Zero

AGuy rccalhoun Fri, 11/03/2017 - 13:07 Permalink

"but every couple will have 5 robots in their family"

To some degree that is close. Roll back the clock a few decades and most manufacturing was done by human workers. Since the 1970's Factory automation and outsourcing has eliminated the need for human factory workers. Even China is moving to near full automated factories. We simply don't need large populations to produce stuff.

That said, the (Western) Millienals are not educated/motivated to adapt into high tech economy. They may use smartphones, Ipads, and other technology, but very few have any clue how these devices work, or how to design or repair them.

Interesting times ahead, and the outcome probably isn't going to be good.

In reply to by rccalhoun

Ghordius Fri, 11/03/2017 - 11:50 Permalink

what... ramblings. must be Friday, with the WE approaching fast

yes, world population is stabilizing. yes, it's good. besides, it kills some swaths of "doom! impending doom! theories"

contraceptives. duh. even Africans are using them, even in the Sub-Sahara region

one good sign that the article is of very low quality: the use of "central bankers". so deliciously... vague. is the CB of Russia counted in? the People's Bank of China? nah, does anybody... actually care?

ZZR600 Ghordius Fri, 11/03/2017 - 12:01 Permalink

Stabilizing populations aren't bad per se.The problem is much of the current debt and future liabilities can't be paid back if populations (at best) stabilize or (at worst) actually drop. If we borrow to 'build build build' on the assumption that someone in the near future will 'buy buy buy' there is a problem if that person doesn't materialize  

In reply to by Ghordius

AGuy ZZR600 Fri, 11/03/2017 - 13:13 Permalink

"The problem is much of the current debt and future liabilities can't be paid back if populations (at best) stabilize or (at worst) actually drop."

Yup, but consider that if the majority younger generations had engineering\technology education and solid work ethics it might not be a huge problem. Consider that if a skilled tech worker can produce the same value of 100-200 1950's era factory workers, via automated factories? and a lot more automation was applied to tasks normally handled by human workers (agraculture, mining, medical services). If the economy was able to fully embrace a high automated production, the need for workers would be considerable less but economy output could be sustained or increased. Sadly I don't see that happening, because of lack of interested/educated young people, and the pending energy crunch as Oil and NatGas depletions takes hold.

In reply to by ZZR600

bshirley1968 Fri, 11/03/2017 - 11:54 Permalink

This is what happens when the family is turned into an "economic" unit instead of a......family.When bean counters and academics decide what we need is more women in the work place building their careers, becoming executives, joining the military, and showing the world how equal they are.Subsidizing the murder of millions of babies.....that are just too inconvenient or costly........and subsidizing birth control so people can live like dogs without the consequences.......turns out there are consequences for basing everything on money and not on what God intended. 

Pollygotacracker Fri, 11/03/2017 - 11:54 Permalink

Most people around the world have wised up to the fact that kids are a waste of time and money. No one farms anymore, so you don't need built in family farm hands. Kids today are spoiled and lazy. You can't get them to help around the house or outside in the yard. Why have kids at all? I never had any. I don't feel that I missed out on anything. I have friends who tell me that if they had it to do over again they would not have been parents. To each his own.

mijev Pollygotacracker Fri, 11/03/2017 - 13:27 Permalink

Thanks PGC, the first realistic answer I read. This whole article was predicated on the assumption that population growth with shrinking employment will somehow expand the economy. Hint: it won't. Expand the population by 10% there are less workers required than before to fulfill their needs and less taxpayers because jobs are simply disappearing. 

In reply to by Pollygotacracker

Decoherence Pollygotacracker Fri, 11/03/2017 - 14:01 Permalink

The problem is people having more than 1.  Then they don't have the time or money to make them valuable additons to society.  They get sent to a public school to be trained and indoctrinated vs. educated.  Take a look at the Chinese.  They value their ancestors as well as their posterity.  So it's people like yourself that do actually breed who are the cause of our failed youth.  So I thank you for not breeding and sparing us from your spawn.  

In reply to by Pollygotacracker

coast1 Fri, 11/03/2017 - 11:59 Permalink

No way I will invest in stocks..I have some cash and silver and no debt.  But I am thinking about putting 1k into crypto but cant decide etherum or bitcoin...With the news that amazon might go etherum is why its hard to decide....any thoughts?  if amazon follow thru, to me, etherum will go much higher..

Son of Captain Nemo Fri, 11/03/2017 - 12:13 Permalink

Speaking of "depopulation"?... This fella (https://www.rt.com/uk/408689-prince-william-overpopulation-child/) has plenty to say on the subject, and believes that it's a problem that is impacting his pocketbook -not the wars of choice that have murdered millions that he and his family have gambled away with money they keep losing!...

Well at least the last redeeming quality the psychopath has left is that he looks like his Mum?!!!

brushhog Fri, 11/03/2017 - 12:04 Permalink

Nothing to worry about. Its just the way nature works. Populations rise and fall, rise and fall. Like breathing. If you try to breath with only inhalations your lungs will explode and you wont breath ever again. When conditions are right certain things that are beyond our understanding get triggered and the population naturally contracts. When its time ( if we dont destroy ourselves fighting the contraction ) we might expand again. We have to let go of the idea that we are in control of everything.