ASX up 1.9% today the rollercoaster continues.

Forget Peak Oil - It's All About Peak Population Growth

Summary
Global annual population growth peaked in 1988 and is decelerating.

Global annual population growth is estimated to be back to 1950 levels by 2050 but the bulk of "growth" will be among 65+ year olds living longer...not greater births.

Substituting lower interest rates and encouraging more debt for declining population growth (consumption) was and is a tragic error by our central bankers.

The idea that global population growth will perpetually drive increasing demand for food, natural resources, real estate, consumer goods, and global trade is a common theme.
This idea of ever greater demand drives most investors thinking and actions.
The premise the world currently operates under is that demand (consumption) will grow driven by population increases coupled with wage increases and be magnified by access to credit.
The resultant growth will allow rapidly growing debt to be serviced / paid by even more rapidly growing global trade.
But actually, this is mostly wrong now...and eventually entirely wrong. Why???

Global Population Growth Decelerating
According to OECD.stat, global annual population growth peaked in 1988 (chart below) at +93 million/yr and is now +81 million/yr despite the larger total global population. However, by 2050, OECD estimates that population growth will be the same as 100 years earlier (46 million/yr).

It is fair to say this is a "best case" scenario for population growth and if global economic activity continues to "underperform" consensus expectations...population growth will also underperform the below expectations. They will mutually negatively impact one another (as they did positively on the way up) and a vicious cycle well underway.


Today's Population Growth is Old Living Longer...Not More Babies
This is a death dearth...not a baby boom.

However, like a tsunami rolling across the ocean from its epicenter (industrialism), peak populations will hit different nations at different times and with varying severity. Japan, Germany, Taiwan, China, S. Korea, US and almost all the EU nations are already decades into this process while Brazil and India are midstream and Africa has really only just begun.

Advanced OECD Economies
Among the advanced economies of the OECD, population growth of the young ended long ago.


Declining Numbers of Young will Suffer Higher Unemployment due to ongoing Productivity & Innovation

Conclusion
Global young and core population growth is rapidly decelerating and growth of 65+yr/old populations is rapidly increasing. In individual nations (US chart below), as core growth decelerates or goes negative and is replaced by growth among the old, oil consumption declines and economic activity decelerates..


In response to decelerating demand, interest rate cuts and debt are substituted for the decelerating growth (US FFR and debt responding to changing core growth, below).


Decelerating global population growth, particularly among the young, highlights why the central bank prescription of ever lower rates incentivizing ever more debt to be serviced by a flat to declining young population is such tragic folly. The Fed has simply (and quite wrongly) been fighting demographic changes to the US core with FFR cuts and resultant debt. The entirely predictable and foreseeable has come to pass, our economic and financial systems based on infinite growth have run into very finite population limits.

An entirely new mode of thought (based on the above facts rather than consensus fiction) and action are necessary to cope with the legacy issues we now face.
The sooner, the better. Preparing for a world of declining growth of demand / consumption will result in massive overcapacity, "challenges" for the overleveraged, and generally a stable or more likely shrinking pie.
As for investors, this changes everything!

http://seekingalpha.com/article/3556596-forget-peak-oil-its-all-about-peak-popul...
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This article makes many very valid points, in line with what I have often said previously!

But, we can not forget about Oil, as we are now interlocked more than at any other time in history and issues such as Energy, Climate & Technology also impact on many things, as does Demographics!

So, if any Politician (from any Political Party) says that they can restore Economic Growth, you will know THEY HAVE NO UNDERSTANDING OF THE NEW/CURRENT ECONOMIC BASICS OR THEY ARE LYING!!!

The Calm Before The Storm?

Stocks rallied again last week, up a bit less than 1% as weak economic data pushed out - again - expectations for the first Fed rate hike to March of next year. I suspect this won't be the last week that sees that time line extended, although whether that translates to higher stock prices is more questionable.

The idea that an economy that performs so poorly that it keeps the Fed on the sidelines is good for stocks is one that can only be based on recent history - one that starts after the 2008 crisis. For if one looks even a bit further back, it becomes pretty obvious that if the economy is headed for recession, there isn't an interest rate low enough to prevent it. The Fed was cutting rates furiously as we entered both of the last two recessions, and the only thing that will prevent that from being true at the beginning of the next recession is that the Fed has wasted their chance to get off the zero bound. The fact that the market has now pushed the Fed's first rate hike out to March of next year is not, contrary to recent market action, good news for investors.

At some point, bad news will be bad news for stocks again, but the rest of the markets are already reacting to the bad news as if it were exactly that. It is more than passing curious that while stocks took all that bad economic news as a reason to be bullish, other parts of the market were not as sanguine. Bonds rallied all week, Treasuries leading the pack, with the 10-year Treasury at one point dipping below 2% again. The Fed may think rates need to be higher, but the market disagrees vehemently. Bonds at the long end of the Treasury curve were up more than the S&P 500 - in a good week for stocks - while high yield bonds managed only a token gain. Bond investors aren't buying the stock rally, refusing to take on additional risk in the face of weak data.

Meanwhile, corporate profit margins appear to have peaked, and debt incurred for previous stock buybacks is starting to bite - two not entirely unrelated events.

And after so many years of low rates, refinancing just doesn't get companies the jolt to earnings it once did. Companies have spent the last 7 years cutting costs - through layoffs, reluctant hiring, more offshoring and by refinancing higher-cost debt at today's low rates. All of those trends appear to have run their course, leaving company profit growth at the mercy of top line growth - something conspicuous only by its absence in the last couple of years.

The Fed has worked overtime since the 2008 crisis to produce a stability, a sense of normalcy in the economy and markets.
It also encouraged - forced, according to many - investors to take on more risk than they probably should or even know. The Fed's forced stability has produced an economy that struggles to grow at the new normal, secular stagnation rate of about 2% per year, but also one more vulnerable to shocks. It is a stable equilibrium now, but almost any minor shock could change that dynamic for the worse, and quickly so.

I have no idea what that shock - minor or major - might be that pushes the economy over the edge into contraction. I also have no idea when that might happen; it could be weeks, months or years, but as we're seven years into this expansion, it seems more likely it is one of the former than the latter.
If this is the calm before the storm, stock investors are about to get swept overboard.

http://seekingalpha.com/article/3580896-the-calm-before-the-storm?ifp=0
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"I also have no idea when that might happen; it could be weeks, months or years, but as we're seven years into this expansion, it seems more likely it is one of the former than the latter. "

Well, since "the expansion" has not been based on "free market realities", it is unlikely that the "next phase" of this GFC will follow "standard operating procedures".

That said, I agree, time is starting to run low & GFC2 is more likely to be sooner, rather than later!

Economics, The Art Of Deception Vs. Demographics, The Simple (Yet Ugly) Reality

Summary

Population growth is the main driver of economic growth, and population growth is ending in developed nations and slowing in developing nations.

As core 16-54 year old population growth ends, oil consumption has peaked and declined indefinitely, indicating slowing economic activity.

Interest rate cuts and debt are substituted for decelerating population growth...

but population growth is not coming back in our lifetime

. Thus, how will ever fewer repay ever more debt?

The Federal Reserve's economic ineptitude has likely resulted in a self-reinforcing negative cycle of deflation, depression, and depopulation with unknowable depth, duration, and collateral damage.

World Population Growth is Decelerating From the Bottom Up
I'll make what is somehow an objectionable claim among economists...

the world is finite

.
So, a financial and economic system premised on infinite growth and returns was an absurd concept to begin with. However, the absurdity isn't reached until a finite limit is hit. Many believed it would be a resource-driven limit, such as peak oil or peak fresh water. But alas, the resource limit the world is hitting is consumer growth, also known as population growth.

The quantity and quality of population growth is primarily what one needs to know to understand changes in global demand and subsequent supply. To understand a global or national economy, quantity (number of participants or population) plus quality (income, savings, plus leverage or credit) tells the story.

Still, the tiny marginal change in population (in relation to the total population) has impacts magnitudes larger than the numbers suggest. Population growth is the primary driver for all increases in demand, from housing, to cars, to consumer goods, to large infrastructure build-ups to accommodate all these.

Quantity of Growth

Population growth is pretty much the nexus of all GROWTH. Funny, we hear so little about demographics and yet so much about growth?!?

Annual global population growth peaked in the 1980s, and by 2050, is set to decelerate back to the same gross growth as in the 1950s (despite a total population three times larger than that of the 1950s).


Quality of Growth
The chart below shows both total global growth and a breakdown by 0-64 year olds versus those in the 65+ year old category. Growth in the 0-64 year old segments represents true population growth (incoming births over outgoing old... 65+), while 65+ growth represents those living longer, thanks to improved medicine, nutrition, fewer wars, etc.


Population Growth Ends... Oil Consumption Peaks and Declines in Sympathy
When the 15-64 year old core population growth peaks, stalls, and or outright declines, oil consumption falls (despite overall populations continuing to grow).


The Fed Made the Inevitable Transition into a Catastrophe

I have gone a fair ways to outline that population growth was a limited feature that is now coming to an end. Central banks' models premised on the fallacy that this is a cyclical downturn rather than the structural revolution from high population to low/no population growth are entirely mismanaging fiscal and economic policy.

The chart below makes it plain that US federal deficit spending (and periods of slowing economic growth) has been used to offset what are simply periods of slow core population growth.




Conclusion
Slowing population growth, particularly among the under-65 crowd, is the malady that afflicts the economic and financial world, and is the reason central banks are now doing back-flips to sustain the unsustainable system they created. However, now debt is maxed out and massive Fed interest rate-created overcapacities are resulting in deflationary and depressionary economic activity, meaning a self-reinforcing negative cycle is underway, of which the depth, duration, and collateral damage are simply unknowable.

Typically, a recession or depression would rebalance supply with demand, but this has always been amid population growth and the rising demands of this new, larger populace. In this case, demand is likely to continue falling indefinitely with falling populations. This means supply will need to consistently shrink until some equilibrium is found.

Central banks are representing the greatest and wealthiest among us, and are "all in" on the perpetuation of this Ponzi.

http://seekingalpha.com/article/3590996-economics-the-art-of-deception-vs-demogr...
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Nuff said!

China...Fictional Fairytale Vs. Factual Truths

Summary
China credit, GDP, and wages are all likely to significantly miss over the next 5+ years...and more likely for decades.

China represented the bulk of global growth from '08 to present but that population and credit fueled growth has come to an end.

Since July '11, China has abandoned US Treasury purchases despite ongoing record dollar trade surplus'. If not Treasuries, where are all those dollars going?

The fictional story of China I often read is that of 7% annual GDP growth, fast rising wages, and growing middle class consumerism underpinning so many corporations growth and revenue estimates. However, the non-fiction reality is a different story altogether. That of Chinese credit growth quadrupling since '07 as the primary trigger for the doubling of wages and tripling of GDP over that period.

A quick review from 2000 should help offer some perspective:
'00-->'07 global credit grew $55T (China was up $5 T or 9% of the global total). Chinese core pop grew by 120 million (9.5% increase vs. China's '00 total population). China wages rose 2.3x's, GDP 2.9x's. China represented 30% of global growth in oil consumption.

'08-->'14 global credit grew $57 T (China credit grew by $21 T or 37% of global credit growth). China's core population rose 42 million (3% increase vs. China total '08 population). China wages rose 2x's, GDP 2.9x's. China represented 56% of global growth in oil consumption.

'15-->'21 China's core population will fall an est. <-11m> (or a -1% decline vs. China total population and the decline will only accelerate thereafter).

The gazillion dollar question is if China's core population is sure to decline, and China credit isn't likely to quadruple again (again, that would be $84 t or $12 trillion/yr over the next 7 years); how likely is China's wage and GDP growth to maintain its pace over this next 7 year period?

China's rise of oil consumption? China's shopping mall bonanza? China's housing surplus? China's role as pre-eminent driver of global growth...or any growth (period) in China? Or perhaps contraction is the most likely outcome and the implications for commodities to consumer goods will be decelerations and/or contractions for oil, steel, iPhones. You name it and growth of Chinese demand is set to collapse (not necessarily demand itself, but growth in Chinese demand at anything resembling the past 15 years is highly dubious).

CHINA'S DEMOGRAPHICS
China's 0-64yr/old population will shrink for decades (chart below)...despite China's politically implemented one child policy, nearly all nations that have moved from high to low birth rates have been unable to revert back to higher birth rates. This is true across the EU where nation upon nation have unsuccessfully offered incentives of all sorts to increase birth rates. The story in Asia is the same in Japan, Taiwan, S. Korea, and China all seeing significantly negative birth rates...and Asia (incl. India) in total has fallen from 5.8 in 1950 to 2.1 children per female of child bearing age as of 2015...and still falling. China's softening of its one child policy a couple years ago and outright abandonment now are likely to have little, if any, impact on this.



CHINA HOUSING SURPLUS

Again, in a nation faced with decades of a shrinking 0-64yr/old population (representing fewer potential buyers every year)...a massive overhang of 50 to 100 million vacant housing units (primarily high end units) seems about the worst possible scenario.

http://seekingalpha.com/article/3637166-china-fictional-fairytale-vs-factual-tru...
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So, this "Communist nation", which saved the Global Economy after the GFC (?), is now no longer able to do so!

A$ briefly dipped below US $ 0.70. If US increases interest rates A$ could drop below US$ 0.6.

A$/US$ 52 Wk Low 0.6898      52 Wk High 0.8795

perceptions_now wrote on Nov 13^th, 2015 at 10:23am:


Well, Well, Well, it seems I picked an "interesting" time, to have a "Longweekend"!?

Anyway, the All Ords finished Friday down 70 (1.36%), at 5,122.
http://www.tradingroom.com.au/apps/index.ac

On Friday night, the DOW was down 203 (1.16%), to finished at 17,245.
http://www.investing.com/indices/us-30

Also, WTI Crude finished trading at $40.74 and is now closing in on its August 2015 low of $38.24, which was its low for some time!
http://www.investing.com/commodities/crude-oil

Finally, the BDIY index finished at 560, which is also closing in on its Februrary 2015 low of 513, which was also a long term low!
http://www.bloomberg.com/quote/BDIY:IND

It will be "interesting" to see how next week starts up & in particular what the DOW Futures start up like tomorrow morning!?